Nokia India Pvt. Ltd., Gurgaon V. DDIT, New Delhi

ITA 3532/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0062 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2013
• Court: TRIBUNAL
• Keywords: Transfer pricing; Search and seizure; Double taxation relief; Opportunity of being heard; Principle of natural justice; Additional evidence; Question of law; Wholly owned subsidiary; Onus to prove; Retraction; Reason to believe
• Section: 133A; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI A.T. VARKEY: JUDICIAL MEMBER ITA NO. 3532/DEL/2013 ASSTT. YR: 2007-08 NOKIA INDIA PVT. LTD., VS. DY. DIRECTOR OF INCOME -TAX, CIR. 2(1), I ST & IIND FLOOR, TOWER-A, INTERNATIONAL TAXATION, TOWAR-A, S.P. INFOCITY, NEW DELHI. UDYOG VIHAR, PHASE-I, DUNDAHERA, GURGAON. TAN: DELNO 6295 C ( APPELLANT ) (RESPONDENT) APPELLANT BY : SH. P. KAKA SR. ADV.; SH. VIKASH SRIVASTAVA ADV. SH. PARAG MOHONTY ADV. RESPONDENT BY : SH. G. DAVE ADV. (SPL. COUNSEL); SH. SANJEEV SHARMA CIT(DR); SH. RAJESH KUMAR JHA ADDL. CIT(DR) SH. SANJAY POUL ACIT DATE OF HEARING : 12/03/2015. DATE OF ORDER : 22/05/2015. INTERIM O R D E R PER S.V. MEHROTRA, A.M:- THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST CIT(A)S ORDER DATED 29-12-2009 RELATING TO A.Y. 2007-08. 2 ITA 3522/DEL/2013 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE (H EREINAFTER REFERRED TO AS NIPL), IS A 100% SUBSIDIARY OF NOKIA CORPORATION , OYJ, WHICH IS REGISTERED UNDER THE LAWS OF FINLAND AND, THEREFORE , IS A FOREIGN COMPANY. THE ASSESSEE IS AN INDIAN COMPANY, HAVING ITS REGIS TERED OFFICE AT DELHI AND CORPORATE OFFICE AT GURGAON AND MANUFACTURING PLANT AT CHENNAI. THE ASSESSEE HAS THREE SEZ UNDERTAKINGS, NAMELY, NOKIA ENTERPRISE SOLUTIONS HYDERABAD, NOKIA TECHNOLOGY PLATFORM BANGALORE AND NOKIA CDMA R&D UNIT MUMBAI. 2.1. SURVEY U/S 133A WAS CONDUCTED ON THE GURGAON C ORPORATE OFFICE AND CHENNAI FACTORY PREMISES OF ASSESSEE ON 8-1-2013. T HE AO HAS PASSED ORDER U/S 201/201(1A) READ WITH SECTION 195 OF THE I.T. A CT, ON 15-3-2013. THE AO POINTED OUT THAT THE MAIN SERVER AND THE ADMINIS TRATOR RIGHTS OF THIS SYSTEM WERE LOCATED AT FINLAND. THE EMPLOYEES OF N IPL WERE GIVEN USER RIGHTS ON NEED BASIS. REPORTS WERE GENERATED FROM T HE SYSTEM AT CHENNAI, REGARDING THE PAYMENTS MADE BY NIPL TO NOKIA CORPOR ATION FOR SOFTWARE REQUIRED TO BE INSTALLED IN THE MOBILE HANDSETS DUR ING MANUFACTURING. HE HAS FURTHER OBSERVED THAT THESE REPORTS WERE CROSS CHEC KED, COLLATED AND COMPILED YEAR-WISE BY THE EMPLOYEES OF NIPL. THE I NVOICES RAISED BY NOKIA CORPORATION FOR SOFTWARE PAYMENTS WERE ALSO F OUND AND IMPOUNDED DURING THE COURSE OF SURVEY AT FACTORY PREMISES AT CHENNAI. 2.2. HE HAS FURTHER OBSERVED THAT IN COURSE OF SURV EY IT WAS FOUND THAT SINCE COMMENCEMENT OF OPERATION AT ITS MANUFACTURI NG FACILITY IN CHENNAI I.E. FY 2006-07 TO 2011-12, NIPL HAD BEEN MAKING PA YMENTS FOR SOFTWARE TO NOKIA CORPORATION TO THE TUNE OF US $ 3,36,26,31 ,484/- FOR USE IN ITS MANUFACTURING OPERATIONS AS DETAILED HEREUNDER: 3 ITA 3522/DEL/2013 S. NO. F.Y. AMOUNT IN USD 1 2006-07 3,29,384,588 2 2007-08 780,931,513 3 2008-09 529,643,621 4 2009-10 584,174,808 5 2010-10 808,576,221 6 2011-12 329,920,733 TOTAL 3,362,631,484 2.3. HE OBSERVED THAT THESE PAYMENTS WERE MADE WITH OUT DEDUCTION OF TAX AT SOURCE. THE AO EXAMINED THE DETAILS WITH RESPECT TO COMMERCIAL AGREEMENTS SUBMITTED BY THE DEDUCTOR AND ON THE BAS IS OF THESE AGREEMENTS AND INVOICES IMPOUNDED, CONCLUDED THAT PAYMENTS WER E MADE FOR SOFTWARE DOWNLOADS MADE BY NIPL UNDER THE AGREEMENT FOR USE IN MANUFACTURING. THE AO, INTER ALIA, HAS OBSERVED AS UNDER: IT WAS THUS REQUIRED TO BE EXAMINED WHETHER THESE WERE IN THE NATURE OF ROYALTY AND WHETHER THEY FALL WITHIN THE PURVIEW OF SECTION 9 (1)(VI) OF INCOME TAX ACT 1961 AND THE IN DIA FINLAND DOUBLE TAXATION AVOIDANCE AGREEMENT. PAYMENTS FOR S OFTWARE ARE TYPICALLY CHARACTERIZED AS ROYALTY BOTH UNDER T HE ACT AND DTAAS AS THE CONFER 'USE SIMPLICITOR' OR 'RIGHT TO USE' OF PROPRIETARY SOFTWARE AND ARE THUS TAXABLE ON SOURCE BASIS. PERUSAL OF TRANSFER PRICING DOCUMENTATION, SOFTWAR E SUPPLY AGREEMENT DATED 01.01.2006 AND R&D SUB-CONTR ACT AGREEMENT BETWEEN M/S. NOKIA CORPORATION, FINLAND A ND M/S. NOKIA INDIA LTD WILL REVEAL THAT PAYMENTS WERE BEIN G MADE FOR VARIOUS INTANGIBLES/INTELLECTUAL PROPERTY RIGHTS SU PPLIED BY M/S. NOKIA CORPORATION, FINLAND. HOWEVER, IN THE BOOKS O F ACCOUNT AND THE TRANSFER PRICING DOCUMENTATION THESE PAYMEN TS WERE CAMOUFLAGE AND SHOWN AS PAYMENTS MADE FOR PURCHASE OF RAW MATERIAL AND SPARE PARTS. 4 ITA 3522/DEL/2013 ALTHOUGH THE INVOICES CLEARLY MENTIONED SOFTWARE IM PORTS, THE SOFTWARE IMPORTS HAD NOT BEEN REFLECTED IN COL. NO. 9 OF FORM 3CEB OF NIPL FOR INTANGIBLES. THE SOFTWARE IMPORTED WAS REPORTED AS CLUBBED WITH TANGIBLES. ~II THE ABOVE F ACTS INDICATED THAT PREPARATION OF INVOICES 'MANUALLY BY EMPLOYEES OF NIPL ON BEHALF OF NOKIA CORPORATION OYJ WAS A DE LIBERATE ENDEAVOUR WITH THE PURPOSE OF CAMOUFLAGING PAYMENT FOR USE/RIGHT TO USE THE SOFTWARE DOWNLOADS IN MANUFACT URE AS PURCHASE OF RAW MATERIALS GOODS. THE ISSUES IN THESE PROCEEDINGS U/S 201 R.W.S. 195 OF THE ACT CAN THUS BE SIMPLY SUMMARIZED AS UNDER: WHETHER THE SUMS ON ACCOUNT OF REMITTANCES MADE BY NIPL TO NOKIA CORPORATION FOR SOFTWARE DOWNLOADS ARE 'SUMS CHARGEABLE TO TAX' AS LAID DOWN IN S 195 OF THE ACT AND THUS WHETHER NIPL CAN BE HELD TO BE AN 'ASSESSEE IN DEFAULT' FOR NON- DEDUCTION OF TAX THEREON AS PER LAW. 3. THE AFOREMENTIONED OBSERVATIONS WERE BASED ON HI S DETAILED EXAMINATION OF HOW THE TRANSACTION WAS EXECUTED WH ICH HAS BEEN CONSIDERED IN PARA 3.2 OF HIS ORDER. THE AO TOOK I NTO CONSIDERATION THE VARIOUS E-MAILS, AGREEMENTS, INVOICES AND STATEMENT S RECORDED DURING THE COURSE OF SURVEY AND CONCLUDED THAT PAYMENTS MADE T O NOKIA CORPORATION WERE TOWARDS ROYALTY, AS AGREED BY BOTH PARTIES, IN THE NATURE OF ROYALTY OR NOT. 4. AT THE OUTSET BOTH THE PARTIES REQUESTED THAT FI RST THE DECISION BE RENDERED ON THE PRELIMINARY ISSUE CONCERNING THE LE GALITY OF SURVEY PROCEEDINGS; RELIANCE TO BE PLACED ON THE EVIDENCE COLLECTED DURING SURVEY PROCEEDINGS AND OBSERVANCE OF PRINCIPLE OF NATURAL JUSTICE WHILE FRAMING THE ORDER U/S 201/201(1A). THE APPEAL WAS, THEREFORE, H EARD APROPOS THE GROUNDS CONCERNING THESE ISSUES. 5 ITA 3522/DEL/2013 5. LD. SR. COUNSEL, SHRI PORUS KAKA SUBMITTED THAT SURVEY COULD NOT BE MADE FOR TDS PROCEEDINGS. HE POINTED OUT THAT SECTI ON 133A(2A) HAS BEEN NEWLY INTRODUCED BY THE FINANCE (NO. 2) ACT, 2014 W .E.F. 1-10-2014, WHICH ONLY ENTITLES THE INCOME-TAX AUTHORITIES TO CONDUCT SURVEY IN REGARD TO TDS PROCEEDINGS. IN THIS REGARD LD. SR. COUNSEL REFERRE D TO PROVISO TO SUB-SECTION (3), WHICH RESTRICTS THE IMPOUNDING OF BOOKS OR OTH ER DOCUMENTS AND ALSO TO TAKE INVENTORY OF CASH, STOCK OR OTHER VALUABLE AR TICLES OR THING. HE SUBMITTED THAT THE AUTHORITIES IMPOUNDED LAP TOPS, MOBILE PHONES ALLOTTED TO MR. PRAKASH KATAMA AND MR. RAHUL SOOD WITHOUT AUTHO RITY. MOREOVER, THE STATEMENTS OF EMPLOYEES PRESENT AT THE TIME OF SURV EY COULD NOT BE RECORDED ON OATH. INCOME-TAX AUTHORITIES HAD NO POWER TO ENT ER THE PREMISES. THUS, THE SURVEY CARRIED OUT PRIOR TO 1-10-2014 IN REGARD TO TDS PROCEEDING WAS ILLEGAL. 5.1. LD. SR. COUNSEL SUBMITTED THAT ASSESSEES EMPL OYEES FULLY COOPERATED IN ALL PROCEEDINGS AND, THEREFORE, SUMMONS UNDER SE CTION 131 COULD NOT BE ISSUED BY TAKING RECOURSE TO THE PROVISIONS OF SECT ION 133A(6), UNLESS IT IS ESTABLISHED THAT PERSONS PRESENT AT THE TIME OF SUR VEY, DID NOT CO-OPERATE IN SURVEY PROCEEDINGS. HOWEVER, IN THE PRESENT CASE SI NCE THE EMPLOYEES OF THE COMPANY HAD FULLY COOPERATED WITH THE INCOME-TAX AU THORITIES DURING SURVEY, AFFORDED OPPORTUNITY TO THE INCOME-TAX AUTH ORITIES TO EXAMINE DOCUMENTS, THEREFORE, THERE WAS NO QUESTION OF ANY NON-COOPERATION ON THE PART OF EMPLOYEES AND, THEREFORE, SUMMONS U/S 131 COULD NOT BE ISSUED. 5.2. HE SUBMITTED THAT ALL THE EMPLOYEES DID THEIR VERY BEST TO ANSWER VARIOUS QUERIES RAISED BY INCOME-TAX AUTHORITIES AN D PROVIDED CLARIFICATIONS. HE POINTED OUT THAT THE EMPLOYEES ASSURED THAT THE DOCUMENTS NOT READILY 6 ITA 3522/DEL/2013 AVAILABLE WITH THEM WOULD BE PROVIDED TO THE TAX AU THORITIES. THE EMPLOYEES OF NIPL WERE NOT EVASIVE AND DID NOT RESIST THE INC OME-TAX AUTHORITIES. 5.3. IN THIS REGARD, LD. COUNSEL HAS RELIED ON FOLL OWING DECISIONS: - CIT V. S. KADAR KHAN SON, [APPEAL(CIVIL) NOS. 13224 OF 2008 & 6747 OF 2012]. - UNITED CHEMICAL AGENCY V. R.K. SINGH ITO 97 ITR 14. - N.K. MOHNOT V. DCIT 215 ITR 275 (MAD.) - VIJAY PAHWA VS. DCIT 254 ITR 354 (CAL); -SRI VENKATESHWARA TOURIST HOME (P) LTD. V. ADIT (I NV.) (1988) 233 ITR 736. 5.4. LD. SR. COUNSEL FURTHER SUBMITTED THAT STATEM ENTS OF EIGHT EMPLOYEES WERE RECORDED ON OATH, EVEN THOUGH THERE IS NO SUCH REQUIREMENT U/S 133A OF THE ACT AND THERE ARE JUDICIAL PRECEDENTS, WHICH STATE THAT INCOME-TAX AUTHORITIES ARE NOT AUTHORIZED TO RECORD STATEMENTS ON OATH DURING SURVEY PROCEEDINGS U/S 133A OF THE ACT. IN THIS REGARD HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. S. KA DAR KHAN SON (SUPRA). 5.5. LD. SR. COUNSEL FURTHER SUBMITTED THAT IN COUR SE OF SURVEY, ONLY THOSE PERSONS COULD BE EXAMINED WHO WERE PRESENT AT THE T IME OF SURVEY. THEREFORE, THERE WAS NO OCCASION TO QUESTION EITHER THE AUDITORS OF NIPL OR MR. JITENDER GROVER, WHO WAS NO LONGER PART OF NOKI A AND, THEREFORE, SUMMON U/S 131 COULD NOT BE ISSUED TO THEM. 5.6. THUS, IN SUM AND SUBSTANCE, LD. SR. COUNSEL S UBMITTED THAT THE SUMMONS ISSUED U/S 131 WERE WITHOUT ANY AUTHORITY O F LAW AND THE STATEMENTS RECORDED OR DOCUMENTS COLLECTED PURSUANT TO THE SUMMONS CANNOT BE USED AGAINST ASSESSEE IN ANY LEGAL PROCEEDINGS. 5.7. LD. SR. COUNSEL FURTHER SUBMITTED THAT SINCE THE ASSESSEE FILED ITS RETURNS AT NEW DELHI AND IS BEING ASSESSED TO TAX U NDER CIRCLE 13(1), NEW 7 ITA 3522/DEL/2013 DELHI, ANY PROCEEDING UNDER THE ACT PERTAINING TO N IPL COULD BE TAKEN BY THE APPROPRIATE JURISDICTIONAL OFFICER HAVING TERRI TORIAL JURISDICTION OVER NIPL. HE REFERRED TO PAGE 1 OF PB VOL. I, WHEREIN THE SUMMONS U/S 131 DATED 11-1-2013 ADDRESSED TO SHRI ARJA BJORKLUND, C HIEF FINANCIAL OFFICER, M/S NOKIA INDIA SALES PVT. LTD. FROM S. SENTHIL KUM ARAN, DDIT(INV.), UNIT1(1), CHENNAI, IS CONTAINED AND SUBMITTED THAT S. SENTHI KUMARAN WAS NEITHER THE AO OF ASSESSEE NOR HAVING TERRITORIAL J URISDICTION OVER THE ASSESSEE AND, THEREFORE, SUMMONS COULD NOT BE ISSUE D. HE REFERRED TO PAGE 3 OF VOL. I, WHEREIN THE ASSESSEE REQUESTED FOR DROPP ING THE SUMMON PROCEEDINGS U/S 131 INITIATED AGAINST CERTAIN EMPLO YEES AS WELL AS EX- EMPLOYEES OF ASSESSEE ENUMERATING VARIOUS REASONS. 5.8. LD. SR. COUNSEL FURTHER SUBMITTED THAT THE E NTRY OF DIRECTOR OF INCOME-TAX (INVESTIGATION), ALONG WITH 10-12 INCOME -TAX DEPARTMENTS OFFICIALS AS WELL AS MR. SASTRY K. PENDYALA, FROM C FSL INTO THE FACTORY PREMISES OF NIPL AT SRIPERIMBUDUR, CHENNAI, WAS ILL EGAL INASMUCH AS DIT(INV.), DID NOT PRODUCE ANY WARRANT FOR ENTRY IN TO THE PREMISES FOR INSPECTION AND DID NOT INDICATE THE REASON FOR HIS ENTRY INTO THE FACTORY. 5.9. LD. SR. COUNSEL FURTHER SUBMITTED THAT DDIT(IN V.) STYLED THE FACTORY PREMISES OF NIPL AS CAMP OFFICE IN THE NOTICES/ S UMMONS ISSUED U/S 131 AND RECORDED THE STATEMENT OF EMPLOYEES ON OATH. HE POINTED OUT THAT THE DDIT HAD NO JURISDICTION TO RECORD STATEMENT AS POW ER VESTS WITH THE AO. 5.10. LD. SR. COUNSEL FURTHER REFERRED TO CBDT NOTI FICATION NO. S.O. 1189 (E) DATED 3-12-2001 TO SUBMIT THAT THE DIRECTOR OF INCOME-TAX (INV.), CHENNAI COULD EXERCISE HIS POWERS VESTED IN HIM U/S 132 OF THE ACT AND PERFORM HIS FUNCTIONS RELATING THERETO IN RESPECT O F THE TERRITORIAL AREAS OF 8 ITA 3522/DEL/2013 WHOLE OF INDIA. HOWEVER, IN RESPECT OF OTHER PROVIS IONS OF THE ACT, HE COULD PERFORM HIS FUNCTIONS RELATING THERETO IN RESPECT O F TAMILNADU AND PONDICHERRY EXCEPT MAHE AND YENAM. THEREFORE, THE D IRECTOR OF INCOME-TAX (INV.), CHENNAI COULD NOT CARRY OUT SURVEY U/S 133A IN RESPECT OF ASSESSEE, WHOSE JURISDICTION LAY WITH AO AT DELHI. THEREFORE, THE LD. DDIT (INV.) CHENNAI HAD NO TERRITORIAL JURISDICTION OVER NIPL U /S 131 OF THE ACT. 5.11. THUS, IN SUM AND SUBSTANCE, LD. SR. COUNSEL S UBMITTED THAT SINCE LD. DDIT(INV.) CHENNAI DID NOT HAVE TERRITORIAL JURISDI CTION OVER NIPL, SINCE THE SURVEY U/S 133A HAD ALREADY BEEN COMPLETED ON 9-1-2 013, LD. DDIT(INV.), OUGHT NOT TO HAVE ENTERED INTO THE OFFICE PREMISES OF NIPL. THE SUMMONS/ NOTICES ISSUED BY THE LD. DDIT(INV.) CHENNAI WERE W ITHOUT ANY AUTHORITY OF LAW AND ANY STATEMENT RECORDED OR INFORMATION COLLE CTED PURSUANT TO THE SUMMONS SHOULD NOT BE USED AGAINST NIPL IN ANY LEG AL PROCEEDINGS. THE ASSESSEE RELIED ON THE DECISION OF HONBLE KERALA H IGH COURT IN THE CASE OF PAUL MATHEWS & SONS V. CIT 263 ITR 101. 5.12. LD. SR. COUNSEL FURTHER SUBMITTED THAT IF EVI DENCE HAS BEEN COLLECTED BY BREACH OF FUNDAMENTAL RIGHT OF PRIVACY OF EMPLOY EE, THEN THE SAID EVIDENCE CANNOT BE USED AGAINST THE ASSESSEE, BECAU SE IT IS NOT A QUESTION OF EXERCISE OF IRREGULAR JURISDICTION BUT INHERENT LA CK OF JURISDICTION. 5.13. LD. SR. COUNSEL FURTHER SUBMITTED THAT THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF POORAN MAL VS. DIRECTO R OF INSPECTION 93 ITR 505 (SC), DOES NOT DEAL WITH THE ISSUE REGARDING BR EACH OF PRIVACY, BECAUSE NO SUCH ARGUMENT WAS ADVANCED BEFORE THE HONBLE SU PREME COURT ON THIS BASIS. LD. COUNSEL RELIED ON THE DECISION IN THE CA SE OF DISTT. REGISTRAR AND COLLECTOR, HYDERABAD VS. CANARA BANK AIR 2005 SC 1 86 AND ALSO THE DECISION IN THE CASE OF R.M. MALKANI VS. STATE OF MAHARASTRA AIR 1973 SC 9 ITA 3522/DEL/2013 157. LD. COUNSEL POINTED OUT THAT THE HONBLE SUPRE ME COURT, INTER ALIA, IN PARA 31, OBSERVED AS UNDER: 31. ARTICLE 21 WAS INVOKED BY SUBMITTING THAT TH E PRIVACY OF THE APPELLANTS CONVERSATION WAS INVADED. ARTICLE 21 CO NTEMPLATES PROCEDURE ESTABLISHED BY LAW WITH REGARD TO DEPRIVA TION OF LIFE OR PERSONAL LIBERTY. THE TELEPHONIC CONVERSATION OF AN INNOCENT CITIZEN WILL BE PROTECTED BY COURTS AGAINST WRONGFUL OR HIG H HANDED INTERFERENCE BY TAPPING THE CONVERSATION. THE PROTE CTION IS NOT FOR THE GUILTY CITIZEN AGAINST THE EFFORTS OF THE POLICE TO VINDICATE THE LAW AND PREVENT CORRUPTION OF PUBLIC SERVANTS. IT MUST NOT BE UNDERSTOOD THAT THE COURTS WILL TOLERATE SAFEGUARDS FOR THE PROTECT ION OF THE CITIZEN TO BE IMPERILED BY PERMITTING THE POLICE TO PROCEED BY UNLAWFUL OR IRREGULAR METHODS. IN THE PRESENT CASE THERE IS NO UNLAWFUL OR IRREGULAR METHOD IN OBTAINING THE TAPE RECORDING OF THE CONVE RSATION. 5.14 HE, THEREFORE, SUBMITTED THAT THE RECORDING OF STATEMENT SHOULD NOT BE IRREGULAR. 5.15. LD. SR. COUNSEL FURTHER REFERRED TO THE DECIS ION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF KRISHNADAS SHANKARRAON AB HARE (DR.) VS. STATE OF MAHARASTRA, WHEREIN IT HAS, INTER ALIA, BEEN HELD T HAT STATEMENT RECORDED BY UNAUTHORIZED PERSON IS NOT AN ADMISSIBLE EVIDENCE. HE ALSO RELIED ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE O F MAMMU AND ANOTHER VS. ASSTT. COLLECTOR CENTRAL EXCISE, 1984(17) ELT 5 4 (KER.). 5.16. LD. COUNSEL SUBMITTED THAT REVENUES ENTIRE C ASE IS BASED ON THE SUBMISSIONS RECORDED DURING SURVEY PROCEEDINGS AND SUBSEQUENTLY BY ISSUING SUMMONS TO VARIOUS EMPLOYEES/ EX EMPLOYEES AND AUDITORS OF THE ASSESSEE (WITNESS). HE SUBMITTED THAT WITHOUT PREJ UDICE TO ASSESSEES CONTENTION THAT THESE STATEMENTS AND OTHER CONTENTI ONS HAD NO EVIDENTIARY VALUE, THE STATEMENTS CANNOT BE RELIED UPON WITHOUT AFFORDING THE ASSESSEE AN 10 ITA 3522/DEL/2013 OPPORTUNITY TO CROSS EXAMINE THE WITNESSES WHOSE S TATEMENTS HAVE BEEN RELIED UPON BY AO AT THE TIME OF PASSING THE IMPUGN ED TAX WITHHOLDING ORDER U/S 201/201(1A) OF THE I.T. ACT OR THE STATEM ENTS WHICH ARE PROPOSED TO BE RELIED UPON BY THE REVENUE AT ANY STAGE OF TH E PROCEEDINGS. LD. SR. COUNSEL FURTHER SUBMITTED THAT ASSESSEE WAS GIVEN V ERY LIMITED TIME TO FILE ITS RESPONSES DURING THE ASSESSMENT PROCEEDINGS (TI ME OF ONE OR TWO DAYS ONLY WAS GIVEN BETWEEN THE HEARINGS, AND MOST OF TH ESE HEARINGS WERE INDICATED TO BE THE FINAL HEARING). FURTHER AO PAS SED THE ORDER WITHOUT WAITING FOR THE FINAL CFSL REPORT. THIS WAS CONTRAR Y TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN BHARTI CELLULAR [2010] 193 TAXMAN 97 (SC) AND THE INSTRUCTION OF THE CBDT (INSTRUCTION NO. 5/2011 [F. NO. 225/6112011- IT (A-11)] DATED 30 MARCH 2011). LD. SR. COUNSEL SU BMITTED THAT OBSERVANCE OF THE PRINCIPLES OF NATURAL JUSTICE IS AN INTEGRAL PART OF ANY QUASI- JUDICIAL PROCEEDINGS. LD. SR. COUNSEL SUBMITTED THAT THIS PR INCIPLE HAS BEEN UPHELD BY THE HON'BLE SUPREME COURT IN A NUMBER OF JUDICIA L PRECEDENTS. IN SURAJ MALL MOHTA AND CO. V. A. V. VISWANATHA SASTRY, (195 4) 26 ITR 1 (SC) THE SUPREME COURT HAS RULED THAT ASSESSMENT PROCEEDINGS BEFORE THE INCOME TAX OFFICER ARE JUDICIAL PROCEEDINGS AND ALL THE INCIDE NTS OF SUCH JUDICIAL PROCEEDINGS HAVE TO BE OBSERVED BEFORE THE RESULT I S ARRIVED AT. THE ASSESSEE HAS A RIGHT TO INSPECT THE RECORD AND ALL RELEVANT DOCUMENTS BEFORE HE IS 11 ITA 3522/DEL/2013 CALLED UPON TO LEAD EVIDENCE IN REBUTTAL. THIS RIGH T HAS NOT BEEN TAKEN AWAY BY ANY EXPRESS PROVISION OF THE INCOME TAX ACT. THI S PRINCIPLE HAS ALSO BEEN RE-EMPHASIZED BY THE HON'BLE SUPREME COURT IN DHAKESHWARI COTTON MILLS V. COMMISSIONER OF INCOME TAX [1954] 26 ITR 7 75 AND C.B. GAUTAM V. UNION OF INDIA: (1993) 199 ITR 530 (SC). THE RIG HT TO A FAIR HEARING REQUIRES THAT THE ASSESSEE BE GIVEN AN OPPORTUNITY TO EFFECTIVELY REBUT THE EVIDENCE SOUGHT TO BE RELIED UPON BY THE REVENUE AG AINST THE ASSESSEE. AN EFFECTIVE RIGHT TO CROSS-EXAMINE WITNESSES WHOSE ST ATEMENTS ARE SOUGHT TO BE USED AGAINST THE ASSESSEE IS A SINE QUA NON OF SUCH A RIGHT. THE HON'BLE ALLAHABAD HIGH COURT HAD OCCASION TO DEAL WITH THIS ISSUE IN GARGI DIN JWALA PRASAD V. CIT: 96 ITR 97 (ALL). IN THIS CASE, THE ASSESSING OFFICER HAD PURPORTEDLY OBTAINED INFORMATION AND RECORDED STATE MENTS OF CERTAIN PERSONS WHICH WERE USED AGAINST THE ASSESSEE DURING THE ASS ESSMENT PROCEEDINGS. THE ASSESSEE OPPOSED THIS AND ASKED FOR AN OPPORTUN ITY TO CROSS-EXAMINE THE WITNESSES WHOSE STATEMENTS THE ASSESSING OFFICER WA S RELYING ON. THE ASSESSING OFFICER AGREED TO ISSUE COMMISSION FOR CR OSS EXAMINATION OF WITNESSES BUT DID NOT HAND OVER THE STATEMENTS OF T HESE WITNESSES TO THE ASSESSEE. THE HONBLE ALLAHABAD HIGH COURT HELD THA T AN EFFECTIVE RIGHT 'OF CROSS-EXAMINATION HAS NOT BEEN GRANTED BY THE ASSES SING OFFICER SINCE THE ASSESSEE COULD NOT EFFECTIVELY CROSS EXAMINE THE WI TNESSES IN ABSENCE OF THE 12 ITA 3522/DEL/2013 RECORDED STATEMENTS OF THESE WITNESSES AND REMANDED THE MATTER BACK TO THE ASSESSING OFFICER WITH DIRECTIONS TO PROVIDE THE AS SESSEE WITH AN EFFECTIVE RIGHT OF CROSS EXAMINATION. THUS, THE HONBLE ALLAH ABAD HIGH COURT HELD THAT TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTI CE, THE ASSESSING OFFICER SHOULD HAVE GIVEN THE STATEMENTS OF THE WITNESSES T O THE ASSESSEE AND,THEREAFTER, AFFORDED HIM AN OPPORTUNITY TO CROS S EXAMINE THESE WITNESSES. THIS PRINCIPLE HAS ALSO RECEIVED RECOGNI TION IN ANOTHER DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF MOT I LAL PADAMPAT UDYOG LTD. V. CIT: (2007) 293 ITR 565. LD. SR. COUNSEL FU RTHER SUBMITTED THAT IN A RECENT DECISION OF THE HON'BLE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF INGRAM MICRO, (INDIA) EXPORTS V. DDIT: ITA NO. 8134 IMUM/2010, THE TRIBUNAL HAS HELD THAT WHEN STATEMENTS OF WITNESSES ARE SOUGHT TO BE USED AGAINST AN ASSESSEE, THE ASSESSEE HAS A RIGHT TO CR OSS-EXAMINE SUCH WITNESSES. IN THIS CASE, SINCE AN OPPORTUNITY TO CROSS EXAMINE WAS DENIED, THE TRIBUNAL REMANDED THE MATTER BACK TO THE ASSESSING OFFICER. 5.17. LD. SR. COUNSEL SUBMITTED THAT IN THE PRESENT CASE, ALTHOUGH THE APPELLANT WAS PROVIDED THE STATEMENTS OF VARIOUS WITNESSES RELIED UPON BY THE AO OR PROPOSED TO BE RELIED UPON, NO OPPORTUNI TY WAS PROVIDED BY THE AO OR CIT(A) TO THE ASSESSEE TO CROSS-EXAMINE SUCH WITNESSES SO THAT THE VERACITY AND CONTEXT OF THESE STATEMENTS COULD BE E STABLISHED. HE SUBMITTED 13 ITA 3522/DEL/2013 THAT NEITHER THE PERSONS WHOSE STATEMENT ARE RELIED ON BY THE AO/CIT(A) NOR THE ADDITIONAL STATEMENTS OF THE PERSONS FILED BY T HE DEPARTMENT BEFORE THE TRIBUNAL HAVE BEEN PERMITTED TO BE CROSS EXAMINED D ESPITE REQUEST TO CROSS- EXAMINE THEM BY THE ASSESSEE. THE ASSESSEE WAS NOT PROVIDED ADEQUATE OPPORTUNITY TO REBUT THE STATEMENTS OF WITNESSES US ED AGAINST THE ASSESSEE IN THE IMPUGNED ORDER, NOR WAS THE ASSESSEE GIVEN AN O PPORTUNITY TO' CROSS EXAMINE THESE WITNESSES. THE CROSS-EXAMINATION ASSU MES GREATER IMPORTANCE ESPECIALLY IN A CASE WHERE AN AUTHORITY IS TREATING THE STATEMENTS AS THE BASIS OF THE ORDER AND THEY ARE RECORDED IN AN ILLEGAL S URVEY ACTION. IN THE PRESENT CASE, THE REVENUE'S ENTIRE CASE IS BASED ON STATEME NTS OF WITNESSES. AS A NECESSARY CONCOMITANT OF THE AUDI ALTERAM PARTEM THE ASSESSEE HAS TO BE AFFORDED THE OPPORTUNITY TO CROSS-EXAMINE THE WITNE SSES, IN THE INTEREST OF THE PRINCIPLES OF NATURAL JUSTICE. LD. SR. COUNSEL RELIED ON FOLLOWING DECISIONS :- - NEW INDIA ASSURANCE COMPANY LTD. V. NUSLI NEVILL E WADIA: (2008) 3 SCC 279. - STATE OF KERALA V. K.T. SHADULI GROCERY DEALER ET C: (1977) 2 SCC 777 - TRIBUNAL (TM) IN SUNIL AGARWAL V. ACIT: (2002) 7 6 TTJ (DEL) 748 - CIT V. VIRGIN SECURITIES & CREDITS: 332 ITR 396 ( DEL) AND - CIT V. SMC SHARE BROKERS LTD: 288 ITR 345(DEL) - VASANTLAL (C.) AND CO. V. COMMISSIONER OF INCOME- TAX 45 ITR 206(SC), - COMMISSIONER OF INCOME-TAX V. EASTERN COMMERCIAL ENTERPRISES 210 ITR 103(CAL). 14 ITA 3522/DEL/2013 5.18. LD. SR. COUNSEL SUBMITTED THAT REVENUE HAS M ADE A CLAIM THAT THE ASSESSEE DOES NOT HAVE A RIGHT TO CROSS-EXAMINE ITS OWN EMPLOYEES. LD. SR. COUNSEL SUBMITTED THAT THIS IS FACTUALLY INCORRECT. MAJOR RELIANCE WAS PLACED BY THE AO/CIT(A) AND THE DEPARTMENT ON THE STATEMEN TS OF MR JITENDRA GROVER WHO WAS NOT AN EMPLOYEE EVEN AT THE TIME OF THE SURVEY OR DURING THE ASSESSMENT PROCEEDINGS. IN ADDITION MOST OF THE ADDITIONAL STATEMENTS NOW BEING RELIED UPON ARE OF EX-EMPLOYEES. HE SUBMI TTED THAT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN KISHINCHAN D CHELLARAM V. COMMISSIONER OF INCOME-TAX 125 ITR 713 THE BURDEN I S ON THE DEPARTMENT TO PRODUCE THESE WITNESSES AND NOT THE ASSESSEE. H E SUBMITTED THAT IN ANY EVENT THE RIGHT OF THE ASSESSEE TO CROSS-EXAMINE WI TNESSES IS NOT DEPENDENT ON ITS RELATIONSHIP WITH THE WITNESSES, BUT ON THE FACT THAT THE STATEMENTS OF SUCH WITNESSES HAVE BEEN USED AGAINST THE ASSESSEE TO PREJUDICE ITS CASE. HE SUBMITTED THAT ALTHOUGH THE MAJORITY OF WITNESSES W ERE EMPLOYEES OF THE ASSESSEE, THEY ARE THE WITNESSES OF THE REVENUE AND HENCE, THE ASSESSEE HAS A RIGHT TO CROSS-EXAMINE THEM. IN THIS CONTEXT, HE PL ACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH OF THE DELHI BENC H OF THE TRIBUNAL IN SUNRISE TOOLING SYSTEMS PVT. LTD. VS. ITO: ITA NO. 3136/DEL/2010. WHILE DEALING WITH AN ASSESSEES RIGHT TO CROSS-EXAMINE W ITNESSES, THE TRIBUNAL OPINED THAT THE RIGHT TO CROSS-EXAMINE CANNOT BE DE NIED ON THE GROUND THAT SUCH RIGHT ONLY EXISTS WHEN A THIRD PARTY IS INVOLV ED OR A PARTY NOT KNOWN TO THE ASSESSEE OR A HOSTILE WITNESS IS INVOLVED. FURT HER, HE PLACED RELIANCE ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN SMT. MADHU GUPTA V. DCIT, MUMBAI: ITA NO. 8504 OF2004. THE TRIBUNAL RUL ED IN FAVOUR OF AN ASSESSEE'S RIGHT TO CROSS-EXAMINE ITS OWN EMPLOYEES WHERE THEIR STATEMENTS 15 ITA 3522/DEL/2013 WERE PURPORTED TO BE USED AGAINST THE ASSESSEE. SIM ILARLY IN ITO V. CLOTH DISTRIBUTORS: 45 TAXMAN 151 THE AHMEDABAD BENCH OF THE TRIBUNAL HAS UPHELD THE RIGHT OF A PARTNERSHIP FIRM TO CROSS-EXA MINE ITS PARTNERS. THEREFORE, THE DISTINCTION BETWEEN AN ASSESSEE AND ITS EMPLOYEES OR ITS CONSTITUENT PARTNERS IS WELL RECOGNIZED AND THIS CA NNOT BE A BASIS TO DENY THE APPELLANT THE RIGHT TO CROSS- EXAMINE ITS EMPLOYEES . 5.19. THE ASESSEE HAS FILED WRITTEN SUBMISSIONS ON THIS ISSUE ON 17-12-2014 WHICH ARE PLACED ON RECORD. 6. LD. SPL. COUNSEL SHRI G. DAVE VEHEMENTLY OPPOSE D THE SUBMISSIONS ADVANCED BY LD. REPRESENTATIVES OF THE ASSESSEE. 6.1. AT THE OUTSET SHRI DAVE SUBMITTED THAT THE TRI BUNAL BEING CREATURE OF STATUTE HAS NO POWER TO LOOK INTO THE VALIDITY OF S URVEY. SHRI DAVE REFERRED TO SECTION 253 OF THE I.T. ACT, WHICH ENUMERATES VARIO US ORDERS WHICH CAN BE ASSAILED BEFORE TRIBUNAL BY WAY OF APPEAL. HE POINT ED OUT THAT NONE OF THE ACTION TAKEN BY DDIT HAS BEEN ENUMERATED IN SECTION 253 AND, THEREFORE, TRIBUNAL CANNOT EXAMINE THE VALIDITY OF SURVEY. 6.2. SHRI DAVE FURTHER SUBMITTED THAT ASSESSEE HAS NOT TAKEN ANY GROUND IN FORM NO. 36 CHALLENGING THE VALIDITY/ LEGALITY OF S URVEY. IN THIS REGARD HE SUBMITTED AS UNDER: IN GROUND NO.1, THE ALLEGATION IS AGAINST THE DDIT (INTERNATIONAL TAXATION) OF HAVING NOT FOLLOWED PRI NCIPLES OF NATURAL JUSTICE IN THE COURSE OF PROCEEDINGS UNDER SECTION 201/201(A). IN GROUND NO.2, NON-COOPERATION ON THE PART OF THE EMPLOYEES AS ALLEGED BY THE OFFICERS CONDUCTING SUR VEY IS DENIED. IN GROUND NO.3, IT IS STATED THAT LEARNED C IT (A) ERRED IN LAW BY HOLDING THAT THE LEARNED DDIT, CHENNAI HAD T ERRITORIAL JURISDICTION OVER THE APPELLANT UNDER SECTION 131 O F THE ACT. IN GROUND NO.4, IT IS APPEALED THAT LEARNED CIT(A) ERR ED IN HOLDING THAT THE STATEMENTS OF EMPLOYEES RECORDED UNDER SEC TION 133A AS WELL OF EMPLOYEES, EX-EMPLOYEES AND AUDITORS REC ORDED 16 ITA 3522/DEL/2013 UNDER SECTION 131HAD EVIDENTIARY VALUE. IN NO OTHER GROUND THERE IS ANY CHALLENGE TO THE CONDUCT OF SURVEY UND ER SECTION 133A OF THE ACT. THE APPELLANT HAS ALSO NOT FILED A NY ADDITIONAL GROUND IN THE COURSE OF HEARING OF THE APPEALS BEFO RE HONBLE BENCH. THEREFORE, IT IS SUBMITTED THAT THE APPELLAN T HAS NOT TAKEN ANY GROUND CHALLENGING THE VALIDITY/LEGALITY OF SURVEY UNDER SECTION 133A OF THE ACT. 6.3. SHRI DAVE FURTHER SUBMITTED THAT IN THE PRESEN T APPEAL, THE ORDER U/S 201/201(1A) PASSED BY THE DDIT CIRCLE 2(1), INTERNA TIONAL TAXATION, NEW DELHI, WHO IS THE ASSESSING OFFICER, HAS BEEN ASSA ILED. HE POINTED OUT THAT THE AO WAS NOT COMPETENT TO EXAMINE, THE CORRECTNES S OR OTHERWISE, OF THE ACTS PERFORMED BY THE DDIT(INV.), CHENNAI, WHILE CO NDUCTING SURVEY U/S 133A OF THE ACT, AS THE LATTER WAS ACTING AT THE IN STANCE OF ADDL. DIT(INV.), CHENNAI ON THE BASIS OF AUTHORIZATION ISSUED. HE SU BMITTED THAT BOTH THE AUTHORITIES I.E. DDIT (INTERNATIONAL TAXATION), NE W DELHI, MAKING ORDER U/S 201/201(1A) OF THE ACT AND THE DDIT (INV.), CHENNAI , CONDUCTING THE SURVEY U/S 133A OF THE ACT, ARE TWO SEPARATE, DISTI NCT AND INDEPENDENT STATUTORY AUTHORITIES, PERFORMING THEIR RESPECTIVE FUNCTIONS ASSIGNED TO THEM UNDER THE ACT AND ONE OR THE OTHER CANNOT SIT IN JU DGMENT OF EACH OTHERS ACTIONS AND FUNCTIONS. 6.4. THE AO HAS MADE USE OF MATERIAL MADE AVAILABLE TO HIM BY THE DDIT (INV.), WHICH THE LATTER COLLECTED IN THE COURSE OF PROCEEDINGS U/S 133A OF THE ACT. IF THERE WERE ANY CONTRAVENTIONS BY DDIT (INV. ), CHENNAI OF THE PROVISIONS OF THE ACT, AS ALLEGED BY THE COMPANY, T HE REDRESS LAY IN OTHER JUDICIAL FORUM LIKE FILING A WRIT PETITION BEFORE THE HONBLE HIGH COURT OF DELHI BUT NEVER MADE ANY SUCH ALLEGATION WHICH NOW IT WAS RAISING. HE POINTED OUT THAT AN ANALOGY MAY BE DRAWN FROM THE D ECISIONS GIVEN IN THE CONTEXT OF CHALLENGE OF VALIDITY OF SEARCH U/S 132 BEFORE THE TRIBUNAL, 17 ITA 3522/DEL/2013 WHEREIN IT HAS BEEN HELD THAT WHILE HEARING OF APPE AL AGAINST AN ORDER OF ASSESSMENT, THE ITAT CANNOT QUESTION THE VALIDITY O R OTHERWISE OF ANY ADMINISTRATIVE DECISION FOR CONDUCTING SEARCH, AS S AME MAY BE SUBJECT MATTER OF CHALLENGE IN INDEPENDENT PROCEEDINGS WHE RE THE QUESTION OF VALIDITY OR OTHERWISE OF ADMINISTRATIVE ORDER COULD BE GONE INTO. IN THIS REGARD HE PLACED RELIANCE ON THE DECISION OF HONBL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PARAS RICE MILLS 313 ITR 182. 6.5. IN SUM AND SUBSTANCE, THE LD. SPL. COUNSEL SUB MITTED THAT THOUGH ORDERS U/S 201/201(1A) CAN BE ASSAILED BEFORE TRIB UNAL, BUT THE ACTIONS TAKEN U/S 133A CANNOT BE ASSAILED BECAUSE FOR THE P URPOSES OF SECTION 133A, THE DDIT(INV.), CHENNAI WAS ONLY AN AUTHORIZED PERS ON. 6.6. WITHOUT PREJUDICE TO AFOREMENTIONED ARGUMENTS LD. SPECIAL COUNSEL SUBMITTED THAT SURVEY U/S 133A OF THE ACT AT CHENNA I AND GURGAON WERE AUTHORIZED BY THE ADDL. DIRECTOR OF INVESTIGATION, CHENNAI AND ADDL. DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION), NE W DELHI SEPARATELY. HE FILED BEFORE US AUTHORIZATION ISSUED BY THESE AUTHO RITIES. LD. SPL. COUNSEL ALSO FILED NOTIFICATION ISSUED BY THE CBDT NOTIFYIN G THE TERRITORIAL JURISDICTION OF THE DIRECTOR OF INCOME-TAX (INV.), CHENNAI TO DEMONSTRATE THAT THE DIT(INV.) CHENNAIS TERRITORIAL JURISDICTION EX TENDED TO TAMIL NADU AND PONDICHERRY EXCEPT MAHE AND YENAM. HE, THEREFORE, S UBMITTED THAT THE OFFICERS ENTERING THE PREMISES WERE NOT UNAUTHORISE D OFFICERS IN ANY MANNER. 6.7. AS REGARDS THE ASSESSEES PLEA THAT SURVEY COU LD NOT BE CONDUCTED FOR VERIFYING THE COMPLIANCE OF TDS PROVISIONS, PARTICU LARLY BECAUSE THE PROVISIONS OF SECTION 133A(2A) WERE INSERTED BY FIN ANCE (NO.2) ACT, 2014, AUTHORIZING THE SURVEY FOR ENSURING COMPLIANCE OF T DS PROVISION, LD. SPL. COUNSEL SUBMITTED THAT SUB-SECTION (2A) DOES NOT CU RTAIL THE POWERS OF 18 ITA 3522/DEL/2013 AUTHORITIES WHO CAN CONDUCT SURVEY OTHERWISE UNDER THE PROVISIONS OF SUB- SECTION (1) OF THE ACT BUT ADDITIONALLY PROVIDES RE STRICTIVE POWER TO CERTAIN DESIGNATED OFFICERS UNDER SUB-SECTION (1A), WHO WER E FUNCTIONING ONLY FOR THE PURPOSE TO ENSURE TDS COMPLIANCE AND DEFAULTS C OMMITTED THERE UNDER. LD. SPL. COUNSEL REFERRED TO THE EXPLANATORY NOTES TO FINANCE (NO. 2) ACT, 2014 TO DEMONSTRATE THAT WHILE CARRYING OUT THE SU RVEY, IN ORDER TO ENSURE TDS COMPLIANCE, INCOME-TAX AUTHORITY CANNOT IMPOUND AND RETAIN IN HIS CUSTODY ANY BOOKS OF ACCOUNT OR DOCUMENTS INSPECTED BY HIM OR MAKE INVENTORY OF ANY CASH, STOCK OR OTHER VALUABLE. HE ALSO REFERRED TO THE EXTRACTS FROM CIRCULAR NO. 1 OF 2015 DATED 21-1-201 5 EXPLAINING THE PURPOSE, INTENT AND RATIONALE FOR INSERTING SUB-SECTION (2A) TO SECTION 133A. 6.8. LD. SPL. COUNSEL FURTHER POINTED OUT THAT PRIO R TO THE INSERTION OF SUB- SECTION (2A) TO SECTION 133A, SURVEY FOR ENSURING O R CHECKING COMPLIANCE FOR PROVISIONS OF TDS COULD BE DONE, IS PROVED FROM THE FOLLOWING DECISIONS: - RECKITT COLEMAN OF INDIA LTD. 252 ITR 550 (CAL.); - RECKITT COLEMAN OF INDIA LTD.251 ITR 306 (CAL.); - CESC LD. VS. ITO 272 ITR 513 (CAL.); - KARNATAKA RURAL INFRASTRUCTURE DEV. LTD. 51 TAXMANN .COM 497 (KAR.); - CIT VS. KINGFISHER AIRLINES ITA NO. 165 OF 2012 (KA R). 6.9. AS REGARDS THE PLEA OF THE LD. COUNSEL FOR THE ASESSEE REGARDING MATERIAL COLLECTED DURING ILLEGAL SEARCH/ SURVEY, L D. SPL. COUNSEL SUBMITTED THAT THIS PLEA CANNOT BE TAKEN BECAUSE THE SURVEY W AS NOT AT ALL ILLEGAL. HOWEVER, WITHOUT PREJUDICE, LD. SPL. COUNSEL RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF POORAN MAL V. DIRECTOR OF INSPECTION 93 ITR 505, WHEREIN IT HAS BEEN HELD THAT MATERIAL COLLECTED DURING ILLEGAL 19 ITA 3522/DEL/2013 SEARCH CAN BE UTILIZED IN ASSESSMENT PROCEEDINGS. H E ALSO RELIED ON FOLLOWING DECISIONS: - CIT VS. KAMAL & CO. 308 ITR 129 (RAJ.); - SMT. KUSUM LATA SINGHAL V. CIT 185 ITR 56 (SC); - DR. PRATAP SINGH V. DIRECTOR OF ENFORCEMENT 155 ITR 166 (AC); - ITO VS. U.K. MAHAPATRA & CO. 186 TAXMAN 181 (SC). 6.10. AS REGARDS THE PLEA OF LD. COUNSEL FOR THE AS SESSEE THAT IN COURSE OF SURVEY U/S 133A STATEMENTS COULD NOT BE RECORDED ON OATH AND IF SO, RECORDED, HAVE NO EVIDENTIARY VALUE, LD. SPL. COUNS EL SUBMITTED THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF DR. DINESH JAIN VS . ITO 363 ITR 210 CONSIDERED THIS ISSUE AND HAS, INTER ALIA, OBSERVED AS UNDER: THE REQUIREMENT OF RECORDING A STATEMENT ON OATH I S FOUND IN SECTION 132 OF THE ACT, I.E. DURING SEARCH AND SEIZ URE PROCEEDING AND SUCH A REQUIREMENT IS NOT FOUND IN SECTION 133A OF THE ACT. NEVERTHELESS A STATEMENT UNDER SECTION 133A OF THE ACT DOES NOT LOSE ITS EVIDENTIARY VALUE MERELY BECAUSE IT IS MADE ON OATH. BESIDES THE STATEMENT IN THIS CASE IS ONE OF THE EV IDENCES BEING RELIED UPON AND NOT THE SOLE EVIDENCE. THE TRIBUNAL IN THE IMPUGNED ORDER HAS RECORDED THAT THE ADDITION OF IN COME IS BASED NOT ONLY ON THE STATEMENT OF THE APPELLANT-AS SESSEE BUT ALSO BASED ON 'PAGE 17'. THE CASE LAW RELIED UPON BY THE APPELLANT IN THE MA TTER OF CIT V. S. KHADER KHAN SON [2013] 352 ITR 480 (SQ ARISIN G FROM THE DECISION OF THE MADRAS HIGH COURT IN CIT V. S. KHAD ER KHAN SON [2008] 300 ITR 157 (MAD) PROCEEDED ON THE FACT THAT THE AUTHORITIES DID NOT ACCEPT THE RETRACTION MADE BY A DEPONENT OF A STATEMENT MADE ON OATH DURING THE SURVEY PROCEEDING S UNDER SECTION 133A OF THE ACT. THIS WAS ON THE GROUND THA T THE STATEMENT WAS MADE ON OATH. BESIDES THE SOLE EVIDEN CE AGAINST THE ASSESSEE IN THAT CASE WAS THE STATEMENT MADE ON OATH DURING THE SURVEY PROCEEDINGS WHICH IS NOT THE CASE IN THE PRESENT 20 ITA 3522/DEL/2013 FACTS. FURTHER, IN THIS CASE, THE APPELLANT-ASSESSE E HAS NOT BEEN ABLE TO SHOW THAT THE STATEMENT MADE IS NOT CORRECT AND/OR UNBELIEVABLE. THEREFORE, THE CASE LAW RELIED UPON B Y THE APPELLANT-ASSESSEE IS COMPLETELY DISTINGUISHABLE AN D NOT APPLICABLE TO THE PRESENT FACTS. (IJ) IN VIEW OF THE ABOVE, WE DO NOT FIND THAT QUES TION (A) RAISES ANY SUBSTANTIAL QUESTION OF LAW. ACCORDINGLY, WE DO NOT ENTERTAIN QUESTION (A).' 6.11. WITH REFERENCE TO ABOVE DECISION LD. SPL. CO UNSEL POINTED OUT THAT IN THE PRESENT CASE ALSO, THE CONCLUSION DRAWN BY AO REGARDING NATURE OF PAYMENT MADE BY ASSESSEE TO NOKIA CORPORATION IS NOT SOLELY BASED ON STATEMENTS OF EMPLOYEES BUT ON OTHER EVIDENCES. THE STATEMENTS HAVE BEEN USED AS CORROBORATIVE EVIDENCE. HE, THEREFORE, SUBM ITTED THAT A STATEMENT MADE U/S 133A OF THE ACT DOES NOT LOSE ITS EVIDENTI ARY VALUE MERELY BECAUSE IT IS MADE ON OATH. 6.12. LD. SPL. COUNSEL FURTHER REFERRED TO THE DECI SION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. HOTEL SAMRAT 323 ITR 353 (KER.) WHEREIN IT HAS BEEN HELD THAT THE DECISION IN THE CASE OF P AUL MATHEWS & SONS 263 ITR 101 (KER.), DOES NOT LAY DOWN CORRECT POSITION OF LAW BECAUSE IN THE VIEW OF HONBLE COURT, THE STATEMENT RECODED U/S 13 3A(3)(III) THOUGH CANNOT BE TREATED AS INDEPENDENT EVIDENCE LIKE EVIDENCE RE CORDED U/S 132(4), IT HAS CORROBORATIVE VALUE IN ASSESSMENT AND CAN BE USED B Y THE DEPARTMENT AS WELL AS BY THE ASSESSEE ALSO, IF IT HELPS AN ASSESS EE. 6.13. AS REGARDS THE PLEA OF ASSESSEE THAT WHEN SUR VEY ENDED ON 9-1-2013, WHERE WAS THE QUESTION OF INVOKING OF SECTION 133A (6), LD. SPL. COUNSEL POINTED OUT THAT DDIT RESUMED INQUIRIES FROM 17 TH JANUARY TO FEBRUARY 2013. HE POINTED OUT THAT THESE PROCEEDINGS WERE TA KEN U/S 131(1A). IN THIS REGARD LD. SPL. COUNSEL POINTED OUT THAT THE INQU IRIES U/S 131(1A) WERE 21 ITA 3522/DEL/2013 NECESSITATED BECAUSE, AS IS EVIDENT FROM THE STATE MENTS RECORDED IN COURSE OF SURVEY, ONE PERSON WAS REFERRING NAME OF OTHER PERS ON WHO WOULD BE IN KNOW OF FACTS. HE FURTHER POINTED OUT THAT IT WAS O NLY ON 24-1-2013 THAT MRS. ARJA BJORKLUND, THE CFO OF THE ASSESSEE, BROUGHT ON RECORD TWO DOCUMENTS, BEING SOFTWARE SUPPLY AGREEMENT OF 1-1-2006 AND ANO THER UNDATED DOCUMENT TITLED AGREEMENT FOR SOFTWARE DELIVERY PROCEDURES , THEREFORE, HER STATEMENT ON 24-1-2013 WAS NECESSITATED. HE FURTHER SUBMITTED THAT SINCE THE GENUINENESS OF THESE DOCUMENTS REQUIRED INQUIRIES I N VIEW OF THE ATTENDANT CIRCUMSTANCES IN WHICH THESE WERE PRODUCED AND DOCU MENTED, THE DDIT (INV.), CHENNAI MADE ENQUIRIES BY RECORDING THE STA TEMENTS OF ALL THE SEVEN TECHNICAL PERSONNEL RESPONSIBLE FOR DOWNLOADING OF THE SOFTWARE ON 7-2- 2013. HE SUBMITTED THAT IN ANY PROCEEDINGS THE STAT EMENTS RECORDED ARE NEED BASED AND SOMETIMES FOR FURTHER ENQUIRIES OR CONFIR MATION. 6.14. LD. SPL. COUNSEL IN SUM AND SUBSTANCE SUBMITT ED THAT UNDER THE PROVISIONS OF SECTION 131(1A), THE DDIT (INV.) CHEN NAI WAS FULLY AUTHORIZED TO RECORD THE STATEMENTS. 6.15. LD. SPL. COUNSEL VEHEMENTLY SUBMITTED THAT RE VENUE HAS SERIOUS OBJECTIONS TO THE RAISING OF SUCH CONTENTIONS IN TH E COURSE OF REPLY BY THE REVENUE WHEN LD. SR. COUNSEL HAD FULLY ARGUED HIS A PPEAL FOR MANY DAYS ON ALL ISSUES INCLUDING MERITS AND HAD COMPLETED HIS A RGUMENTS WITHOUT RAISING ANY SUCH PLEA IN THE COURSE OF HIS ARGUMENTS. LD. S PECIAL COUNSEL EXTENSIVELY REFERRED TO THE SUBMISSIONS OF ASSESSEE ON VARIOUS DATES AND POINTED OUT THAT ASSESSEE AT NO ~STAGE ASKED FOR C ROSS-EXAMINATION OF THE EMPLOYEES OR EX-EMPLOYEES WHO IN FACT LEFT SERVICE AROUND THE SAME TIME BUT WERE ASSOCIATED WITH THE TRANSACTIONS WHICH CAM E TO NOTICE IN THE COURSE OF SURVEY. HE SUBMITTED THAT IT IS A CLASSIC CASE OF DILATORY TACTICS. LD. 22 ITA 3522/DEL/2013 SPECIAL COUNSEL SUBMITTED THAT CROSS-EXAMINATION OF MR. KRISHNA SASTRY PENDYALA, AN OFFICER FROM CENTRAL FORENSIC SCIENTIF IC LABORATORY WAS ASKED FOR BY THE ASSESSEE AT THE STAGE OF THE APPEAL PROC EEDINGS BEFORE THE CIT (APPEALS) AND WAS, ACCORDINGLY, ALLOWED BY HIM. LD. SPECIAL COUNSEL REFERRED TO THE FILING OF WRIT PETITION BY ASSESSEE BEFORE HON'BLE HIGH COURT OF DELHI AGAINST THE NOTICE OF DEMAND, ALLOWING 5 D AYS AS AGAINST STATUTORY PERIOD OF 30 DAYS FOR PAYMENT OF DEMAND PURSUANT TO ORDER UNDER SECTION 201 OF THE ACT. WRIT WAS ALLOWED BY HON'BLE COURT B Y HOLDING THAT THE DEPARTMENT SHALL NOT TAKE ANY COERCIVE MEASURE TILL THE NEXT DATE OF HEARING FOR THE RECOVERY OF DEMANDS. HE FURTHER POINTED OUT THAT ANOTHER SET OF WRIT PETITIONS WERE FILED CHALLENGING ORDERS UNDER SEC TION 201 OF THE ACT ON VARIOUS GROUNDS BUT IN NONE OF THE GROUNDS IN THES E WRIT PETITIONS, THE ASSESSEE SOUGHT TO SEEK QUASHING OF THE ORDER ON TH E BASIS OF ABSENCE OF CROSS-EXAMINATION OF THE WITNESSES, WHO WERE EMPLOY EES OF THE ASSESSEE AT THE TIME OF DEPOSITIONS TAKEN OR AT THE TIME OF SUR VEY. THESE PETITIONS WERE DISMISSED AS WITHDRAWN BY THE ASSESSEE-COMPANY ON 1 7.4.2013 WITH LIBERTY TO FILE THE APPEALS BEFORE THE CIT (APPEALS) AS REQ UESTED BY AND ON BEHALF OF THE ASSESSEE- COMPANY. THE CIT (APPEALS) WAS DIRECT ED TO DISPOSE OF THE APPEALS LATEST BY 31.05.2013. AS REGARDS PROCEEDING S BEFORE CIT (APPEALS) ON THE ISSUE OF CROSS-EXAMINATION, LD. SPECIAL COUN SEL POINTED OUT THAT IN THEIR SUBMISSION DATED 2.5.2013, THE ASSESSEE HAD R EQUESTED THAT IT MAY BE ALLOWED CROSS-EXAMINATION OF ALL THE PERSONS WHOSE STATEMENTS WERE RELIED UPON WHILE FRAMING THE ASSESSMENT. ON A PERUSAL OF THE RECORDS OF THE CIT (APPEALS) IT WAS NOTICED THAT CIT (APPEALS) ASKED T HE AUTHORISED PERSONS APPEARING ON BEHALF OF THE APPELLANT TO SPECIFY WHO SE CROSS-EXAMINATION THEY WOULD BE SEEKING FOR. COPY OF THIS NOTING MADE BY THE CIT (APPEALS) 23 ITA 3522/DEL/2013 AS OBTAINED FROM THE FILE OF THE CIT (APPEALS) ON T HIS LETTER HAS BEEN FILED BY REVENUE. HOWEVER, THE ASSESSEE DID NOT SPECIFY THE EMPLOYEES TO WHOM ASSESSEE WANTED TO CROSS EXAMINE. ONLY CROSS EXAMIN ATION OF TECHNICAL EXPERT MR KRISHNA SASTRY PENDVALA WAS SERIOUSLY ASK ED FOR WHICH WAS ALLOWED BY LD. CIT(A). AS REGARDS OTHERS THE ASSEES SEE HAD POINTED OUT THAT IT WILL BE IN A POSITION TO TAKE THIS CALL ONLY AF TER CROSS-EXAMINING MR. SASTRY. HE SUBMITTED THAT ON 20.05.2013, MR SASTRY WAS EXAMINED AND ON 21.05.2013, HE WAS RE-EXAMINED. AFTER THE CROSS-EXA MINATION OF MR SASTRY, THE ASSESSEE-COMPANY FILED LETTERS TO THE CIT(APPEA LS) ON 23.05.2013, 24.05.2013 & 27.05.2013. IN NONE OF THESE LETTERS, THE COMPANY SOUGHT TO CROSS-EXAMINE ANY PERSON OTHER THAN MR SASTRY. LD. SPECIAL COUNSEL POINTED OUT THAT BEFORE CIT(A) ASSESSEE HAD, INTER-ALIA, S UBMITTED AS UNDER ; 'APPELLANT MAY NOT HAVE THE NEED OF CROSS-EXAMINATI ON ANY OTHER WITNESSES ONCE THE APPELLANT CROSS-EXAMINES M R. SASTRY, IN ANY CASE, THE APPELLANT WILL BE IN A POSITION TO TAKE THIS CALL ONLY AFTER CROSS-EXAMINING MR. SASTRY'.AFTER EXAMIN ATION OF MR. SASTRY, NO REQUEST FOR CROSS-EXAMINATION WAS MA DE. 6.16. LD. SPECIAL COUNSEL FURTHER SUBMITTED THAT I T IS NOW BEING ARGUED THAT IN ITS LETTER DATED 17.05.2013 ASSESSEE REPEATED IT S REQUEST TO ALLOW CROSS- EXAMINATION OF THE PERSONS WHOSE STATEMENTS WERE RE CORDED. HOWEVER, SUCH AN ARGUMENT IS MISPLACED INASMUCH AS THE LETTER DAT ED 03.05.2013 VERY CLEARLY INDICATES THAT AFTER CROSS-EXAMINATION OF M R. SASTRY, THE APPELLANT- COMPANY WOULD DECIDE WHETHER IT REQUIRES CROSS-EXAM INATION OF OTHER PERSONS AND CROSS-EXAMINATION OF MR. SASTRY GOT CON CLUDED ONLY ON 21.05.2013. THOUGH IT FILED THREE LETTERS THEREAFTE R BEFORE THE CIT (APPEALS), IN NONE OF THE LETTERS, THERE IS ANY REQ UEST TO THIS EFFECT. 24 ITA 3522/DEL/2013 6.17. AS REGARDS THE SUBMISSION OF LD. SR. COUNSEL FOR THE ASSESSEE THAT THE CROSS-EXAMINATION SHOULD HAVE BEEN ALLOWED BY THE A O AND AT SUBSEQUENT STAGES OF THE CASE, SUCH ALLEGED 'ILLEGALITY' CANNO T BE CURED, FOR WHICH RELIANCE HAS BEEN PLACED ON THE DECISIONS OF TIN BO X CO VS. CIT REPORTED IN [2001] 249 ITR 216 (SC) AND IN THE CASE OF INGRAM M ICRO (INDIA) EXPORTS DECIDED BY ITAT, BENCH 'L', MUMBAI ON 07.02.2013 IN ITA NO 8134/MUM/2010, LD. SPECIAL COUNSEL SUBMITTED THAT I N THE JUDGMENT OF HON'BLE APEX COURT, IT IS NOT CLEAR AS TO IN WHAT C ONTEXT, THE LACK OF PROPER OPPORTUNITY WAS FOUND BY HON'BLE COURT, WHICH WAS C ONSIDERED INCURABLE IN SUBSEQUENT PROCEEDING BEFORE FIRST APPELLATE AUTHOR ITY. IN THE PRESENT CASE, THE ASSESSEET-COMPANY WITHDREW ITS WRIT PETITION FI LED BEFORE HON'BLE HIGH COURT OF DELHI WITH LIBERTY TO FILE APPEAL BEFORE C IT (APPEALS). IT COULD HAVE PLEADED BEFORE THE HON'BLE COURT TO RESTORE THE CAS E TO THE AO WHICH IT DID NOT. IN THE CASE OF INGRAM CITED SUPRA, THE ISSUE W AS BEFORE THE DRP WHICH IS EXTENSION OF ASSESSMENT PROCEEDINGS AND NOT AN APPE LLATE AUTHORITY AND, THEREFORE, HON'BLE BENCH RESTORED THE MATTER TO THE FILE OF THE AO. FACTS IN THE PRESENT CASE ARE ENTIRELY DIFFERENT. 6.18. AS REGARDS THE PROCEEDINGS BEFORE THE ASSESSI NG OFFICER (AO), LD. SPECIAL COUNSEL POINTED OUT THAT IN PARA 3.2 OF THE ORDER UNDER SECTION 201 OF THE ACT, CONCLUDING THE DISCUSSION ON THE NATURE OF THE TRANSACTION, THE AO HAS HELD THAT FROM THE TRANSFER PRICING DOCUMENT ATION, SOFTWARE SUPPLY AGREEMENT DATED 01.01.2006 AND R&O SUB-CONTRACT AGR EEMENT BETWEEN M/S. NOKIA CORPORATION, FINLAND AND M/S. NOKIA INDI A LTD, EMAILS AND STATEMENTS THAT THE PAYMENTS FOR VARIOUS INTELLECTU AL PROPERTY RIGHTS SUPPLIED BY M/S. NOKIA CORPORATION, FINLAND WERE BEING MADE REGULARLY. THUS, ASSESSING OFFICER DID NOT SOLELY RELIED ON THE STAT EMENTS OF EMPLOYEES ONLY 25 ITA 3522/DEL/2013 BUT USED THEM TO CORROBORATE HIS FINDINGS. LD. SPEC IAL COUNSEL FURTHER SUBMITTED THAT AT PAGE 22 OF HIS ORDER, THE AO HAS CLEARLY STATED THAT THE STATEMENTS WITHOUT EXCEPTION ARE RELIED UPON NOT TO ESTABLISH THE DEFAULT, BUT TO CORROBORATE CERTAIN ASPECTS SUCH AS THE MANUFACT URING PROCESS, THE SOFTWARE DOWNLOADS, THE MANUAL PREPARATION OF INVOI CES, BASIS OF PREPARATION AND THAT THERE WAS NO MATERIAL CHANGE IN THE WHOLE PROCESS OF DOING SO SINCE INCEPTION. THE AO AT PAGE (22) OF HIS ORDER HAS HEL D THAT THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTABLE FOR REASONS AS UNDE R: 1. THE INDIVIDUALS IN WHOSE CASE STATEMENTS HAVE BE EN RECORDED ARE RESPONSIBLE AND ACCOUNTABLE EMPLOYEES OF THE COMPANY, WHO HAVE RECORDED WITHOUT ANY FEAR, COERCI ON AND INFLUENCE; 2. THE STATEMENTS HAVE BEEN CORROBORATED WITH THE O THER ENQUIRIES AND BUSINESS ACTIVITIES OF THE ENTERPRISE BEFORE DERIVING ANY CONCLUSIONS; 3. THE STATEMENTS ARE NOT MADE UNDER ANY MISCONCEPT ION OF FACTS BUT TO EXPLAIN THE FACTS; AND 4. STATEMENTS ARE ONE OF THE BEST FORMS OF EVIDENCE THAT AN OPPOSING PARTY CAN RELY UPON AND THOUGH NOT CONCLUS IVE ARE DECISIVE UNLESS SUCCESSFULLY WITHDRAWN OR PROVED ER RONEOUS. RELIANCE WS BE PLACED ON NARAYAN BHAGWANTRAO GOSAVI BATAJIWALE VS GOPAL AIR 1960 SC 100 AND PRANAV CONS TRUCTION CO VS ACIT (ITAT, MUM) 61 TTJ 145. 6.19. LD. SPECIAL COUNSEL FURTHER SUBMITTED THAT TH E CONCLUSIONS DRAWN BY THE AO ARE QUITE CLEAR. IT WAS NOT NECESSARY FOR TH E AO TO SPECIFICALLY POINT OUT WHICH STATEMENT HE WAS RELYING UPON. IT WAS FOR THE ASSESSEE TO STATE CLEARLY AS WHICH FACT AVERRED BY THE PERSONS WHOSE STATEMENTS WERE RECORDED WAS ERRONEOUS OR INCORRECT. THE STATEMENTS WERE PRO VIDED TO IT. THE 26 ITA 3522/DEL/2013 STATEMENTS WERE NOT THE ONLY BASIS FOR THE CONCLUSI ONS DRAWN BY THE AO AS IS EVIDENT FROM HIS ORDER. 6.20. LIKEWISE, THE AO HAS ALLOWED SUFFICIENT TIME TO EXPLAIN THE CASE AND THIS IS EVIDENT FROM PARA 1.2 WITH ITS SUB-PARAS AT PAGES 10 TO 13 OF HIS ORDER. HE FURTHER SUBMITTED THAT TO ATTRIBUTE MALAFIDE IN THE RECORDINGS OF STATEMENTS OF TECHNICAL PERSONNEL AND ALLEGE COERCI ON AND DURESS WITHOUT ANY AFFIDAVIT ON THE PART OF THESE PERSONNEL REQUIRES O UTRIGHT REJECTION OF SUCH CONTENTIONS. THE PERSONS WHOSE STATEMENTS WERE REC ORDED ARE ALL HIGHLY EDUCATED PERSONS AND CANNOT BE COERCED AS ALLEGED. NONE OF THESE PERSONS HAS LEVELLED ANY ALLEGATION TO THIS EFFECT SO FAR. SUCH IRRESPONSIBLE STATEMENTS MUST BE AVOIDED IF THERE IS NO SUPPORT, EITHER ORAL OR DOCUMENT, IN PROOF. THE CIRCUMSTANCE FOR IDENTICAL TEXT IN REPLIES TO CERTA IN QUESTIONS PUT TO THESE TECHNICAL PERSONNEL HAS BEEN EXPLAINED BY THE THEN DDIT (INV.), CHENNAI WHO WAS RESPONSIBLE FOR THE CONDUCT OF SURVEY. HE P OINTED OUT THAT HIS EXPLANATION OBTAINED IN COMPLIANCE TO THE DIRECTION S OF THE BENCH HAS BEEN FILED. THE CONTENTION OF THE APPELLANT AND INNUENDO EXPRESSED ARE MISPLACED AND UNWARRANTED. IT WAS NEVER RAISED EITHER BEFORE THE AO OR BEFORE CIT (APPEALS) AND EVEN IN THE GROUNDS OF APPEAL BEFORE US. IN REGARD TO ASSESSES PLEA THAT THE MATTER SHOULD BE REMANDED BACK TO THE AO WHERE IN THE OPINION OF THE ASSESSEE IRREGULARITY HAS OCCURRED, LD. SPEC IAL COUNSEL SUBMITTED THAT SUCH AN ARGUMENT HAS SOME ULTERIOR MOTIVE. IT IS WE LL SETTLED THAT APPELLATE PROCEEDINGS BEFORE FIRST APPELLATE AUTHORITY CONSTI TUTES CONTINUATION OF THE ASSESSMENT PROCEEDINGS AS HAS BEEN SO HELD BY HON'B LE APEX COURT IN THE CASE OF CIT VS VIMLABEN VADILAL MEHTA REPORTED IN ( 1984) 1451TR 11 (SC).THEREFORE, THIS ARGUMENT DESERVES REJECTION. 27 ITA 3522/DEL/2013 6.21. HE FURTHER SUBMITTED THAT NATURAL JUSTICE IS NO UNRULY HORSE, NO LURKING LAND MINE, NOR A JUDICIAL CURE-ALL. IF FAIRNESS IS SHOWN BY THE DECISION-MAKER TO THE MAN PROCEEDED AGAINST, THE FORM, FEATURES AN D THE FUNDAMENTALS OF SUCH ESSENTIAL PROCESSUAL PROPRIETY BEING CONDITION ED BY THE FACTS AND CIRCUMSTANCES OF EACH SITUATION, NO BREACH OF NATUR AL JUSTICE CAN BE COMPLAINED OF. THIS WAS SO HELD BY HON'BLE APEX COU RT ON THE ISSUE OF NATURAL JUSTICE IN THE CASE OF CHAIRMAN, BOARD OF M INING VS RAMJEE REPORTED IN AIR 1977 SC 965. 6.22. LD. SPECIAL COUNSEL FURTHER SUBMITTED THAT IT SEEMS QUITE INTERESTING THAT IN THE VTT REPORT FURNISHED BEFORE CIT (APPEAL S) AS ADDITIONAL EVIDENCE BY THE ASSESSEE-COMPANY AT PAGE (31), THE VTT RESEA RCHERS HAVE OBTAINED INPUTS BESIDE A FEW OTHER INDIVIDUALS ON NEED BASIS AT CHENNAI, FROM TWO LEAD PRESENTERS, NAMELY, (1) SHRI E. UMASHANKAR AND (2) SHRI NIKHIL GOPALAKRISHNAN, WHO ALSO EXPLAINED THE PROCESS OF D OWNLOAD OF SOFTWARE TO THE OFFICERS OF THE DEPARTMENT IN THE COURSE OF SUR VEY. THERE IS NO REFERENCE TO THE PROCESS EXPLAINED BY THESE TWO PERSONS AS TO WHETHER THEIR EXPLANATION TO THE OFFICERS OF THE DEPARTMENT WERE INCORRECT OR SUFFERED WITH ANY ERROR, NOR ANY REBUTTAL BY THE APPELLANT-COMPANY ON THE CO RRECTNESS OF THEIR VERSION. WHETHER THEY MADE DIFFERENT PRESENTATIONS TO VTT TEAM OR THEIR PRESENTATIONS WERE SAME AS WERE EXPLAINED TO SURVEY TEAM BUT THE VTT TEAM UNDERSTOOD IT DIFFERENTLY. 6.23. LD. SPECIAL COUNSEL RELIED ON FOLLOWING CASE LAWS ON ISSUE THAT ABSOLUTE RIGHT OF CROSS-EXAMINATION CAN'T BE CLAIME D BY THE SUBJECT- 1. G. SRIDHAR AND ORS. VS. COLLECTOR OF CUSTOMS- 19 92 (43) ECR 95 TRI CHENNAI. 28 ITA 3522/DEL/2013 2. NATH MISHRA AND ORS. VS. THE PRINCIPAL, RAJENDRA MEDICAL- AIR 1973 SC 1260, (1973) IILLJ 111 SC, (1973) 1 SCC 805. 3. KISANLAL AGARWALLA VS COLLECTOR OF LAND CUSTOMS- AIR 1967 CA180, 69 CWN 864 4. SATELLITE ENGINEERING LTD. VS UNION OF INDIA AND OTHERS - 1984 (3) ECC 217, 1983 (14) ELT 2177 BOM, J~M.K. THOMAS VS STATE OF KERALA- (1977) 6 CTR KER 267 6.24. LD. SPECIAL COUNSEL FURTHER SUBMITTED THAT TH E ASSESSEE BY MAKING FRESH ARGUMENTS ON THE ISSUE OF CROSS EXAMINATION O N 17TH DECEMBER 2014 HAS ONLY DELAYED THE PROSECUTION OF APPEAL AND ONLY ASSESSEE AND NONE ELSE MUST SHARE BLAME FOR THE SAME. HE SUBMITTED THAT TH E HON'BLE BENCH HAD ASKED THE ASSESSEE TO SUBMIT THE NAMES OF PERSONS F OR CROSS-EXAMINATION NEXT DAY (18TH DECEMBER). THE REVENUE HAS RECEIVED RESPONSE ON THIS ISSUE ONLY ON 30.01.2015, AFTER NEARLY ONE & A HALF MONTH . IN THIS LETTER ALSO, THE APPELLANT 'DEVIOUSLY' REQUESTS HON'BLE BENCH TO GRA NT IT AN OPPORTUNITY TO CROSS-EXAMINE ANY OR ALL OF THE AFORE-MENTIONED 22 PERSONS. WHAT PURPOSE THE APPELLANT WISHES TO SERVE BY CROSS-EXAMINING 'A NY' OF THE 22 PERSONS, IF SO CONSIDERED BY HON'BLE BENCH. THERE APPEARS SOME DESIGN EVEN IN THIS PLEA, WHICH ONLY THE APPELLANT CAN EXPLAIN. 6.25. THE REVENUE HAS FILED DETAILED WRITTEN SUBMIS SIONS DATED 10-2-2015, WHICH ARE PLACED ON RECORD. 6.26. IN HIS SUBMISSIONS OF 12-3-2015 LD. SPL. COUN SEL AGAIN SUBMITTED THAT STATEMENTS RECORDED IN THE COURSE OF SURVEY MAY BE USED BY WAY OF CORROBORATION FOR THE PURPOSE OF MAKING ASSESSMENT TO THE EXTENT THE SAME DEAL WITH THE FACTS AND HAVE NOT BEEN CHALLENGED BY THE ASSESSEE OR PROVED AS NOT CORRECT BY SUBMITTING OTHER EVIDENCE. LD. SP L. COUNSEL REFERRED TO THE 29 ITA 3522/DEL/2013 ORDER PASSED U/S 201 AND POINTED OUT THAT IN THE FACT MATRIX CONSIDERED IN PARA 3.1 AT PAGE 38 OF HIS ORDER ALONG WITH HIS FINDING IN PARA 3.2.3 AT PAGE 47, AS WELL AS DISCUSSION IN PARA 3.3 UNDER TH E HEADING HOW IS THE TRANSACTION EXECUTED AND HIS FINDING IN PARA 3.3.6 AT PAGE 57 & 58 ALL THE ASPECTS HAVE BEEN DEALT IN DETAIL AND THE ASSESSEE HAS NOT POINTED OUT ANY FACTUAL INACCURACY IN ANY OF THE STATEMENTS RELIED UPON BY AO FOR ARRIVING AT HIS CONCLUSION. THE ASSESSEE DID NOT SPELL OUT EITH ER BEFORE THE AO OR BEFORE CIT(A) AS TO HOW THE STATEMENTS MADE BY THE PERSONS ADVERSELY AFFECTED IT; THAT SOMETHING HAS BEEN SAID WHICH DOES NOT BORNE O UT FROM THE FACTUAL SITUATION. 6.27. THE ASSESSEE HAS NOT TAKEN ANY GROUND TO THIS EFFECT IN FORM NO. 36. AT NO STAG OF PROCEEDINGS THE ASSESSEE WAS ABLE TO SPE LL OUT AS TO IN WHAT WAY IT FEARED THAT THE STATEMENT GIVEN BY ITS EMPLOYEES OR EX-EMPLOYEES DID NOT PROVIDE TRUE AND CORRECT STATE OF AFFAIRS THOUGH TH ESE WERE MADE AVAILABLE TO THE ASSESSEE WELL IN TIME WITH SHOW CAUSE NOTICE. 6.28. AT THE STAGE OF APPEAL PROCEEDINGS BEFORE LD. CIT(A) DESPITE HIS INSTRUCTIONS, THE ASSESSEE NEVER CAME FORWARD TO IN DICATE NAMES OF PERSONS WHOSE CROSS-EXAMINATION WOULD BE REQUIRED FOR REASO NS TO BE GIVEN. IN COURSE OF HEARING, LD. STANDING COUNSEL PRODUCED BE FORE US THE NOTING MADE BY LD. CIT(A) IN COURSE OF HEARING WHEREIN HE REQUI RED THE ASSESSEE TO SPECIFY THE PERSONS TO WHOM IT WANTED TO CROSS-EXA MINE. THIS FACT HAS NOT BEEN DENIED BY ASSESSEE BUT THE ONLY ALLEGATION OF THE ASSESSEE IS THAT LD. CIT(A) DID NOT GIVE IN WRITING. HE SUBMITTED THAT T HIS KIND OF APPROACH ADOPTED BY ASSESSEE IS WHOLLY UNCALLED FOR AND, THE REFORE, THE ASSESSEES PLEA FOR CROSS-EXAMINATION OF VARIOUS EMPLOYEES DESERVES TO BE REJECTED. 30 ITA 3522/DEL/2013 6.19. LD. SPECIAL COUNSEL SUBMITTED THAT ASSESSEE H AS ADOPTED SIMILAR PROCEDURE BEFORE THIS BENCH; PARTICULARLY AT THE F IRST INSTANCE ASSESSEE DID NOT PROVIDE NAMES BUT FURNISHED A LETTER GIVING A C HOICE TO THE BENCH TO CHOOSE ONE OR ALL THE PERSONS WHOSE STATEMENTS WERE RECORDED. HOWEVER, ACTION INDICATED THAT ALL 22 PERSONS BE MADE AVAILA BLE FOR CROSS-EXAMINATION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE RECORD OF THE CASE. 7.1. FIRST WE TAKE THE ISSUE REGARDING LEGALITY OF SURVEY RAISED BY ASSESSEE. LD. SPL. COUNSEL HAS RAISED A PRELIMINARY OBJECTION ON THIS COUNT BY SUBMITTING THAT THE ASSESSEE HAS NOT TAKEN ANY GROU ND TO THIS EFFECT. IN THIS REGARD WE FIND THAT THOUGH THERE IS NO SPECIFIC GRO UND TO THIS EFFECT BUT IN GROUND NO. 3 THE ASSESSEE DID ASSAIL LD. CIT(A)S F INDING IN HOLDING THAT THE LD. DDIT (INV.), CHENNAI HAD TERRITORIAL JURISDICTI ON OVER THE ASSESSEE U/S 133A(1) OF THE ACT. THE ASSESSEE HAS ALSO ASSAILED THE FINDING OF LD. CIT(A) IN HOLDING THAT THE EMPLOYEES OF THE ASSESSEE DID C OOPERATE DURING SURVEY PROCEEDINGS AND, THEREFORE, STATEMENT RECORDED U/S 131 TAKEN BY THE SURVEY PARTIES AT CHENNAI WERE NOT IN ACCORDANCE WITH LAW. THE ASSESSEE HAS ALSO ASSAILED THE FINDINGS OF LD. CIT(A) IN HOLDING THAT THE STATEMENTS OF EMPLOYEES/ EX-EMPLOYEES AND AUDITORS RECORDED U/S 1 31 HAD EVIDENTIARY VALUE. THEREFORE, THOUGH ASSESSEE HAS NOT VERY SPEC IFICALLY TAKEN GROUND THAT FOR TDS PURPOSE, THE RESORT COULD NOT BE HAD TO SUR VEY PROCEEDINGS, PARTICULARLY IN VIEW OF THE AMENDMENT BEING MADE U/ S 133A BY INSERTING SUB-SECTION (2A) BY THE FINANCE (NO. 2) ACT, 1914 W .E.F. 1-10-2014 BUT ASSESSEE DID CHALLENGE THE ACTIONS TAKEN IN COURSE OF SURVEY PROCEEDINGS. 31 ITA 3522/DEL/2013 7.2. BE THAT AS IT MAY, THIS BEING PURELY LEGAL ISS UE, WE GRANT LEAVE TO ASSESSEE TO RAISE THIS ISSUE UNDER RULE 11 OF THE I TAT RULES. ACCORDINGLY, WE REJECT THIS OBJECTION RAISED BY LD. SPL. COUNSEL . 7.3. THE SECOND OBJECTION RAISED BY LD. SPL. COUNSE L IS THAT TRIBUNAL IS NOT ENTITLED TO GO INTO THE LEGALITY OF THE SURVEY PROC EEDINGS, THIS BEING PURELY AN ADMINISTRATIVE ACTION AND U/S 253 NO APPEAL LIES AG AINST THE ADMINISTRATIVE ACTION TAKEN BY THE AUTHORITIES BELOW. THE SUBMISSI ON IS THAT THE TRIBUNAL BEING CREATURE OF STATUTE AND, THEREFORE, IT IS TO CONFINE ITSELF FOR ENTERTAINING THE APPEALS WHICH HAVE BEEN PROVIDED U/S 253 OF THE I.T. ACT. 7.4. LD. SPL. COUNSEL HAS DRAWN THE ANALOGY ON THIS ASPECT FROM THE DECISION OF VARIOUS COURTS IN HOLDING THAT WHILE HE ARING AN APPEAL AGAINST AN ORDER OF ASSESSMENT, TRIBUNAL CANNOT GO INTO THE QU ESTION OR OTHERWISE OF ANY ADMINISTRATIVE DECISION FOR CONDUCTING THE SEAR CH AS SAME MAY BE SUBJECT MATTER OF CHALLENGE IN INDEPENDENT PROCEEDI NGS WHERE QUESTION OF VALIDITY OR OTHERWISE OF ADMINISTRATIVE ORDER COULD BE GONE INTO. LD. SPL. COUNSEL HAS PLACED RELIANCE ON THE DECISION OF HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PARAS RICE MILLS (SUPRA). 7.5. WE ARE NOT INCLINED TO ACCEPT THE PROPOSITION ADVANCED BY LD. SPL. COUNSEL BECAUSE TRIBUNAL U/S 253(1)(A) ENTERTAINS T HE APPEALS FILED AGAINST ORDER OF CIT(A). U/S 246(1)(I). THE APPEALABLE ORDE RS BEFORE CIT(A) INCLUDE AN ORDER PASSED U/S 201. WHEN AN ORDER U/S 201 HAS BEEN PASSED SOLELY ON THE BASIS OF SURVEY BEING CARRIED OUT, THEREFORE, I T CANNOT BE HELD THAT TRIBUNAL IS NOT ENTITLED TO EXAMINE THE VALIDITY OF ACTIONS TAKEN DURING THE COURSE OF SURVEY, WHICH ULTIMATELY CULMINATED IN TH E PASSING OF THE ORDER U/S 201. IN OUR OPINION, ALL THE INCIDENTAL ACTIONS TAK EN BY THE REVENUE AUTHORITIES ARE SUBJECT MATTER OF CHALLENGE BEFORE TRIBUNAL AND, THEREFORE, 32 ITA 3522/DEL/2013 TRIBUNAL, WHILE DECIDING APPEALS AGAINST THE ORDERS PASSED BY LD. CIT(A) IN APPEALS AGAINST THE ORDER U/S 201, IS FULLY EMPOWE RED TO EXAMINE THESE ISSUES. THE POWERS OF TRIBUNAL FOR EXAMINATION OF INCIDENTAL ISSUES FLOWS FROM THE APPEAL PROVIDED U/S 253(1)(A) AGAINST THE CIT(A)S ORDER PASSED U/S 201. THE TERM ORDER ENCOMPASSES WITHIN ITS AMBIT CONSIDERATION OF ALL ACTIONS TAKEN BY AUTHORITIES WHICH CULMINATED INTO THE LIS AND, THEREFORE, WHILE PASSING THE ORDER ALL SUCH ACTIONS HAVE TO BE TAKEN INTO CONSIDERATION. LD. SPL. COUNSEL HAS RELIED ON THE DECISION OF HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PARAS RICE MILLS (SUPRA), WHICH DECISION WAS RENDERED WITH REFERENCE TO THE SEARCH & SEIZURE ACT ION CARRIED OUT U/S 132(1) AND NOT WITH REFERENCE TO SURVEY U/S 133A. IN THAT CASE TRIBUNAL HELD THAT THE SEARCH AND SEIZURE WAS ILLEGAL AND NO MATERIAL WAS PRODUCED BEFORE THE TRIBUNAL TO SHOW THAT THE REQUIREMENTS OF SECTION 1 32(1) OF THE ACT WERE COMPLIED WITH. IN THAT CASE THE TRIBUNAL HAD GONE I NTO THE QUESTION AS TO WHETHER THE CIRCUMSTANCES WARRANTED THE INITIATION OF SEARCH & SEIZURE AND WHETHER THE REQUIREMENTS OF SECTION 132(1) WERE FUL FILLED OR NOT. THUS, TRIBUNAL HAD ENTERED INTO THE ADMINISTRATIVE DOMAIN OF AUTHORITIES AUTHORIZING THE SEARCH. THE POWER FOR CARRYING OUT SEARCH PER SE WAS NOT QUESTIONED. HOWEVER, IN THE PRESENT CASE THE VALIDI TY OF SURVEY HAS BEEN CHALLENGED ON THE GROUND THAT THERE WAS NO PROVISIO N FOR CARRYING OUT SURVEY FOR ENSURING COMPLIANCE WITH TDS PROVISIONS. THE PO WER FOR SURVEY PER SE HAS BEEN CHALLENGED ON THE GROUND OF BEING WITHOUT AUTHORITY OF LAW. MOREOVER, POWER OF SEARCH & SEIZURE OF INCOME-TAX A UTHORITIES CANNOT BE EQUATED WITH THE POWER OF SURVEY, BECAUSE SEARCH CA N BE CARRIED OUT ONLY IF THE SPECIFIC AUTHORITIES MENTIONED U/S 132 HAVE INF ORMATION IN THEIR POSSESSION, ON THE BASIS OF WHICH THEY HAVE REASON TO BELIEVE THAT IF A 33 ITA 3522/DEL/2013 PERSON WHO IS REQUIRED TO DO CERTAIN ACTS AS CONTEM PLATED UNDER CLAUSES (A) AND (B) OF SECTION 132(1), WOULD NOT COMPLY WITH TH E DIRECTIONS AND HAS IN HIS POSSESSION CERTAIN MONEY, BULLION, JEWELLERY OR OTHER VALUABLES OR THINGS, WHICH HAD NOT BEEN OR WOULD NOT BE DISCLOSED. WHERE AS, IN CASE OF SURVEY U/S 133A, DESIGNATED AUTHORITIES CAN ENTER INTO THE BUSINESS PREMISES FOR CHECKING AND VERIFICATION PURPOSE OF CASH, STOCK, D OCUMENTS, BOOKS OF A/C ETC. 7.6. THEREFORE, IT IS EVIDENT THAT SURVEY IS PART A ND PARCEL OF PROCEEDINGS WHICH INCLUDE ASSESSMENT PROCEEDINGS AS WELL AS THE ACTION TAKEN U/S 201/201(1A). WE, ACCORDINGLY, ARE NOT IN AGREEMENT WITH LD. SPECIAL COUNSEL THAT THE VALIDITY OF SURVEY ACTION CANNOT BE EXAMIN ED WHILE DECIDING THE CORRECTNESS OF THE ORDER PASSED U/S 201. THEREFORE, TRIBUNAL IS WELL WITHIN ITS POWERS TO EXAMINE THE CHALLENGE TO VALIDITY OF SURV EY. WE, THEREFORE, PROCEED TO EXAMINE THE SAME. 7.7. THE FIRST OBJECTION OF ASSESSEE REGARDING VALI DITY OF SURVEY IS THAT UNDER THE INCOME-TAX ACT, THERE WAS NO POWER CONFER RED ON INCOME-TAX AUTHORITIES FOR CONDUCTING SURVEY TO VERIFY WHETHE R THE TAX HAS BEEN DEDUCTED OR COLLECTED AT SOURCE IN ACCORDANCE WITH THE PROVISIONS UNDER SUBHEADING B OF CHAPTER XVII OR UNDER SUB-HEADING BB OF CHAPTER XVII, AS THE CASE MAY BE. THE SUBMISSION IS THAT TH IS POWER HAS BEEN CONFERRED ON INCOME-TAX AUTHORITIES BY THE FINANCE (NO. 2) ACT, 2014 W.E.F. 1-10-2014 BY INSERTING SECTION 133A(2A), WHICH READ S AS UNDER: [POWER OF SURVEY. 133A. . . [ (2A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SEC TION (1), AN INCOME- TAX AUTHORITY ACTING UNDER THIS SUB-SECTION MAY FOR THE PURPOSE OF VERIFYING THAT TAX HAS BEEN DEDUCTED OR COLLECTED A T SOURCE IN ACCORDANCE WITH THE PROVISIONS UNDER SUB-HEADING B OF CHAPTER XVII OR UNDER SUB- 34 ITA 3522/DEL/2013 HEADING BB OF CHAPTER XVII, AS THE CASE MAY BE, ENT ER, AFTER SUNRISE AND BEFORE SUNSET, ANY OFFICE, OR ANY OTHER PLACE WHERE BUSINESS OR PROFESSION IS CARRIED ON, WITHIN THE LIMITS OF THE AREA ASSIGN ED TO HIM, OR ANY PLACE IN RESPECT OF WHICH HE IS AUTHORISED FOR THE PURPOSES OF THIS SECTION BY SUCH INCOME-TAX AUTHORITY WHO IS ASSIGNED THE AREA WITHI N WHICH SUCH PLACE IS SITUATED, WHERE BOOKS OF ACCOUNT OR DOCUMENTS ARE K EPT AND REQUIRE THE DEDUCTOR OR THE COLLECTOR OR ANY OTHER PERSON WHO M AY AT THAT TIME AND PLACE BE ATTENDING IN ANY MANNER TO SUCH WORK, ( I ) TO AFFORD HIM THE NECESSARY FACILITY TO INSPECT S UCH BOOKS OF ACCOUNT OR OTHER DOCUMENTS AS HE MAY REQUIRE AND WHICH MAY BE AVAILABLE AT SUCH PLACE, AND ( II ) TO FURNISH SUCH INFORMATION AS HE MAY REQUIRE IN RELATION TO SUCH MATTER . ] 7.8. PER CONTRA, THE SUBMISSION OF LD. SPL. COUNSEL IS THAT SURVEYS WERE CONDUCTED PRIOR TO INSERTION OF THIS SUB-SECTION AN D THE ONLY OBJECT OF INSERTION OF THIS SUB-SECTION IS TO CURTAIL THE POW ERS OF AO IN REGARD TO FOLLOWING: (3) AN INCOME-TAX AUTHORITY ACTING UNDER THIS SECTI ON MAY, [( IA ) IMPOUND AND RETAIN IN HIS CUSTODY FOR SUCH PERIOD AS HE THINKS FIT ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS INSPECTED BY HI M: PROVIDED THAT SUCH INCOME-TAX AUTHORITY SHALL NOT ( A ) IMPOUND ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS E XCEPT AFTER RECORDING HIS REASONS FOR SO DOING; OR [ ( B ) RETAIN IN HIS CUSTODY ANY SUCH BOOKS OF ACCOUNT O R OTHER DOCUMENTS FOR A PERIOD EXCEEDING FIFTEEN DAYS (EXCLUSIVE OF HOLIDAY S) WITHOUT OBTAINING THE APPROVAL OF THE PRINCIPAL CHIEF COMMISSIONER OR THE CHIEF COMMISSIONER OR THE PRINCIPAL DIRECTOR GENERAL OR THE DIRECTOR GENE RAL OR THE PRINCIPAL COMMISSIONER OR THE COMMISSIONER OR THE PRINCIPAL D IRECTOR OR THE DIRECTOR THEREFORE, AS THE CASE MAY BE , ] ] ( II ) MAKE AN INVENTORY OF ANY CASH, STOCK OR OTHER VAL UABLE ARTICLE OR THING CHECKED OR VERIFIED BY HIM, 7.9. HE, THEREFORE, SUBMITTED THAT IT IS BENEFICIAL IN THE INTEREST OF ASSESSEE ONLY. 35 ITA 3522/DEL/2013 7.10. THE OBJECT OF SURVEY IS ALSO TO OBTAIN INFORM ATION IN RESPECT OF ANY MATTER WHICH MAY BE USEFUL FOR OR RELEVANT TO ANY P ROCEEDINGS UNDER THE ACT. THE WORD PROCEEDINGS HAS BEEN DEFINED AS UNDER: (B) PROCEEDING MEANS ANY PROCEEDING UNDER THIS AC T IN RESPECT OF ANY YEAR WHICH MAY BE PENDING ON THE DAT E ON WHICH THE POWERS UNDER THIS SECTION ARE EXERCISED OR WHIC H MAY HAVE BEEN COMPLETED ON OR BEFORE SUCH DATE AND INCLUDES ALSO ALL PROCEEDINGS UNDER THIS ACT WHICH MAY BE COMMENCED A FTER SUCH DATE IN RESPECT OF ANY YEAR. 7.11. ON EXAMINATION OF THE ENTIRE SCHEME OF THE AC T, WE ARE OF THE CONSIDERED OPINION THAT THE PLEA ADVANCED BY LD. C OUNSEL FOR THE ASSESSEE DESERVES TO BE REJECTED FOR THE SIMPLE REASON THAT THE TERM PROCEEDING, DEFINED U/S 133A, INCLUDES THE TDS PROCEEDINGS ALSO . THE SURVEY, THUS, COULD BE CONDUCTED FOR OBTAINING INFORMATION IN REG ARD TO TDS PROCEEDINGS ALSO AS MANDATED U/S 133A SUB-SECTION (1) CLAUSE (I II). WE ARE IN AGREEMENT WITH THE SUBMISSION OF LD. SPL. COUNSEL THAT THIS AMENDMENT HAS BEEN INSERTED BY WAY OF ABUNDANT PRECAUTION SO AS TO ENS URE THAT WHILE CARRYING OUT THE SURVEY PROCEEDINGS, FOR ENSURING COMPLIANCE WITH TDS PROVISIONS, CASH AND STOCK IS NOT EXAMINED. FURTHER, WE FIND FR OM THE CASE LAWS RELIED BY LD. SPECIAL COUNSEL THAT SURVEY WAS CARRIED OUT FOR TDS PURPOSES EVEN PRIOR TO INTRODUCTION OF SUB-SECTION (2A) TO SECTIO N 133A AND HONBLE SUPREME COURT HAS ALSO TAKEN COGNIZANCE OF THE SAME . WE, ACCORDINGLY, HOLD THAT THE SURVEY COULD BE CONDUCTED EVEN PRIOR TO INSERTION OF SUB- SECTION (2A) OF SECTION 133A. 7.12. THE NEXT OBJECTION OF LD. COUNSEL FOR THE ASS ESSEE IS REGARDING AUTHORIZATION TO DDIT, CHENNAI FOR CONDUCTING THE S URVEY. IN THIS REGARD, ON 36 ITA 3522/DEL/2013 EXAMINATION OF THE PROVISIONS OF SECTION 133A, WE F IND THAT THERE IS NO REQUIREMENT UNDER THIS SECTION READ WITH RULES FOR ISSUING OF AUTHORISATION. AS PER PROVISO TO SECTION 133A, THE SURVEY CAN BE C ARRIED OUT BY THE AUTHORITIES MENTIONED IN THE SECTION ITSELF AND ONL Y IF THE SURVEY IS CARRIED OUT BY AN ASSTT. DIRECTOR OR A DY. DIRECTOR OR AO, OR TAX RECOVERY OFFICER OR INSPECTOR OF INCOME-TAX, THEN THE APPROVAL OF THE J OINT DIRECTOR OR THE JOINT COMMISSIONER, AS THE CASE MAY BE, IS REQUIRED. IN THE PRESENT CASE, THE DDIT CHENNAI WAS AUTHORIZED BY THE ADDL. DIRECTOR O F INCOME-TAX (INV.), WHICH WAS IN ACCORDANCE WITH THE CBDT NOTIFICATION NO. S.O. 1189(E) DATED 3-12-2001, THE RELEVANT PORTION OF WHICH IS R EPRODUCED HEREUNDER: MINISTRY OF FINANCE: (DEPARTMENT OF REVENUE) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION NEW DELHI. THE 3RD DECEMBER, 2001 (INCOME-TAX) S.O. 1189(E). - IN EXERCISE OF THE POWERS CONFERRED BY SUB-SECTION (I) AND SUB-SECTION (2) OF SECTION 120 OF THE INCOME-TAX A CL 1961 (43 OF 1961) AND IN SUPERSESSION OF NO. S.O 703(E) DATED 6TH SEP TEMBER, 1989 AND ANY ORDER ISSUED BY THE DIRECTORS-GENERAL OF INCOME-TAX (INV.) . .SO FAR IT RELATES TO THE JURISDICTION OF DIRECTORS. THE CENTR AL BOARD OF DIRECT TAXES HEREBY (A) DIRECTS THAT THE DIRECTORS SPECIFIED IN COLUM N (2) OF THE SCHEDULE HERETO ANNEXED SHALL EXERCISE THEIR POWERS VESTED IN THEM UNDER SECTION 32 OF THE SAID ACT - PERFORM THEIR FUNCTION S RELATING THERETO IN RESPECT OF THE TERRITORIAL AREAS OR WHOLE OF INDIA; (B) DIRECTS (HAT THE DIRECTORS SPECIFIED IN COLUM N (2) OF THE SCHEDULE HERETO ANNEXED SHALL EXERCISE THEIR POWERS VESTED ILL THEM UNDER ALL OTHER PROVISIONS OF THE SAID ACT (OTHER THAN S ECTION 132) AND PERFORM THEIR FUNCTIONS RELATING THERETO IN RESPECT OF THE TERRITORIAL AREAS SPECIFIED IN THE CORRESPONDING ENTRIES IN COLUMN C') OF THE S AID SCHEDULE. (C) AURHORISES THE DIRECTORS SPECIFIED IN COLUMN (2) OF TILE SCHEDULE HERETO ANNEXED TO ISSUE ORDERS IN WRITING FOR THE EXERCISE OF THE 37 ITA 3522/DEL/2013 POWERS AND PERFORMANCE OF THE FUNCTIONS BY ALL OR A NY OF THE INCOME-TAX AUTHORITIES WHO ARE SUBORDINATE TO THEM IN RESPECT OF SUCH TERRITORIAL AREAS AS :NAY BE SPECIFIED IO IN SUCH ORDERS. 2. THIS NOTIFICATION SHALL COME INTO FORCE ON THE DATE OF PUBLICATION IN THE OFFICIAL GAZETTE. SCHEDULE ___________________________________________________ _______________ SL. DESIGNATION OF DIRECTORS TERRITORIAL ARE A NOS. OF INCOME-TAX (INV.) ___________________________________________________ ______________. 1. 2. 3. --------------------------------------------------- ----------------------------------------------. 5. DIRECTOR OF INCOME-TAX (INV.), CHENNAI TAMIL NAD U AND PONDICHERRY EXCEPT MAHE AND YENAM. ___________________________________________________ ________________________ 7.13. THEREFORE, IT CANNOT BE SAID THAT DDIT, CHENN AI WAS NOT DULY AUTHORIZED TO CARRY OUT THE SURVEY. A BARE READING OF SECTION 133A(1) MAKES IT CLEAR THAT SURVEY CAN BE CARRIED OUT AT THE PLAC E WHERE BUSINESS OR PROFESSION IS CARRIED ON IRRESPECTIVE OF THE FACT W HETHER THE PLACE OF BUSINESS OR PROFESSION IS SEPARATE FROM ITS REGISTERED OFFIC E. THE OBJECT OF SURVEY IS TO GATHER INFORMATION IN REGARD TO THE PROCEEDINGS UND ER THE ACT WHICH IS ENUMERATED IN CLAUSES (I),(II) & (III) TO SECTION 1 33A(1), AS REPRODUCED ABOVE AND, THEREFORE THE POWERS CANNOT BE RESTRICTED IN A NY MANNER, PARTICULARLY WHEN SUFFICIENT SAFEGUARDS HAVE BEEN PROVIDED BY L EGISLATURE ITSELF WHILE DRAFTING SECTION 133A, AS IS EVIDENT FROM BARE READ ING OF VARIOUS CLAUSES OF SECTION 133A. 7.14. THE SURVEY AT GURGAON WAS DULY AUTHORIZED BY ADDL. DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION), NEW DELHI. THE REFORE, BOTH THESE AUTHORITIES I.E. DDIT CHENNAI AS WELL AS ITO, TDS C OULD ENTER THE PREMISES OCCUPIED BY THE COMPANY TO CONDUCT SURVEY ON THE ST RENGTH OF AUTHORIZATION 38 ITA 3522/DEL/2013 ISSUED TO THEM. THE ASSESSEE HAS ALSO ALLEGED THAT SHRI SASTRY FROM CFSL COULD NOT ENTER THE PREMISES. IN OUR OPINION, THIS OBJECTION DESERVES TO BE REJECTED BECAUSE IN VIEW OF PROVISIONS OF SEC. 131( 1A) AND THE DECISION OF HONBLE SUPREME COURT IN BHARTI CELLULAR CASE, IT C ANNOT BE SAID THAT DDIT(INV.) EXCEEDED HIS JURISDICTION BY TAKING SHRI SASTRY TO THE FACTORY PREMISES. 7.15. NEXT OBJECTION OF LD. COUNSEL FOR THE ASSESSE E IS THAT STATEMENT U/S 131 COULD NOT BE RECORDED BECAUSE THERE WAS NO NON-COOP ERATION OF PERSONS PRESENT AT THE TIME OF SURVEY AS IS CONTEMPLATED U/ S 133A(6),WHICH ONLY ENTITLES THE AUTHORITY CONDUCTING SURVEY TO RECORD STATEMENT U/S 131. THE SUBMISSION IS THAT IN VIEW OF SECTION 133A(6) ONLY NON-COOPERATION OF PERSONS PRESENT AT THE TIME OF SURVEY TRIGGERS INVO KING OF SECTION 131. IN THIS REGARD WE FIND IN THE LETTER DATED 21-2-2013, CONTA INED AT PAGE 19 TO 24 OF THE PB OF DDIT, INTER ALIA, INFORMED AS UNDER TO TH E ASSESSEE: 1. A SURVEY UNDER SECTION 133A OF THE INCOME TAX A CT WAS CONDUCTED AT THE FACTORY AND CORPORATE OFFICE PREMISES OF MIS . NOKIA INDIA PRIVATE LIMITED (NIPL) IN CHENNAI AND GURGAON RESPECTIVELY ON 08-01-2013. DURING THE COURSE OF SURVEY IT WAS FOUND THAT NIPL NEITHER HAD A PRINCIPAL OFFICER NOR HAD ANY EXECUTIVE I OFFICER H AVING OVERALL CONTROL AND MANAGEMENT. THOUGH THERE WAS AN APPARENT CO-OPE RATION (BY BEING PHYSICALLY PRESENT) FROM THE EMPLOYEES, IN EFFECT T HERE WAS AN ABSOLUTE NON-COOPERATION AS MENTIONED BELOW:- I. FOR ANY INFORMATION CALLED FOR, THE EMPLOYEES KEPT ON SAYING THAT THE INFORMATION WAS NOT AVAILABLE WITH THEM AND HE / SHE WAS NOT RESPONSIBLE/ AUTHORIZED TO DEAL WITH MATTERS RELAT ING TO TAXATION. II. NO BOOKS OF ACCOUNTS WERE FOUND MAINTAINED IN PHYSI CAL FORM AT BOTH THE PREMISES. WHEN QUESTIONED, IT WAS STATED T HAT BOOKS OF ACCOUNT WERE EVER MAINTAINED IN PHYSICAL FORM AND T HEY WERE ALWAYS MAINTAINED IN THE SAP SYSTEM. III. WHEN IT WAS REQUESTED TO SHOW THE COMPUTERIZED ACCO UNTS IN THE SAP SYSTEM, THE NEXT EXCUSE WAS THAT NONE OF THEM H AD ACCESS TO THE BOOKS OF ACCOUNT IN THE SYSTEM AS PER THE PROTO COL. 39 ITA 3522/DEL/2013 IV. WHEN QUESTIONED ABOUT THE AGREEMENTS ENTERED I N TO REGARDING SUPPLY OF SOFTWARE AND OTHER INTANGIBLES, EVERYONE FEIGNED IGNORANCE AND NO SUCH AGREEMENTS WERE PRODUCED. V. WHEN ALL THE EXECUTIVES PRESENT WERE REQUESTED T O EXPLAIN AND SHOW THE BASIS FOR SOFTWARE PRICING ALONG WITH RELE VANT DOCUMENTATION, ALL OF THEM EVADED TO EXPLAIN AND SH OW SUCH BASIS ON ONE PRETEXT OR THE OTHER. 2. AS A RESULT OF SUCH NON CO-OPERATION, THE BOOKS OF ACCOUNT COULD NOT BE SEEN AND THE SURVEY TEAM COULD NOT CARRY THE IR DUTIES AS MENTIONED UNDER SECTION 133A(3) OF THE ACT. IN VIEW OF THE AB OVE, SUMMONS UNDER SECTION 131 OF INCOME TAX ACT, 1961 WERE ISSUED TO THE EMPLOYEES AND THEIR STATEMENTS WERE RECORDED. SUBSEQUENTLY, SOME OTHER EMPLOYEES WERE SUMMONED AND EXAMINED IN THE OFFICE OF THE UNDERSIG NED. EVEN DURING THESE ENQUIRY PROCEEDINGS, NON COOPERATION CONTINUE D AND THE CRUCIAL INFORMATION REQUIRED OR VARIOUS PROCEEDINGS UNDER T HE ACT, -AS MENTIONED BELOW, HAVE BEEN WITHHELD AND NOT SUBMITTED TILL DA TE:- I. XEROX COPIES OF SOFTWARE SUPPLY AGREEMENTS WERE FILED. BY MRS. ARJA BJORKLUND (CFO) ON 24.01.2013. WHEN THE ORIGIN AL AGREEMENTS WERE DESIRED TO BE PRODUCED, MRS. ARJA B JORKLUND (CFO) SOUGHT A WEEK'S TIME. BUT NEITHER SHE NOR ANY ONE FROM NIPL FILED THE SAME SO FAR AND NO EXPLANATION IS GI VEN REGARDING THEIR FAILURE TO COMPLY WITH THE REQUIREMENT. II. FROM SOME OF THE OFFICIAL MAILS (SEEN IN THE I MPOUNDED LAPTOPS) BROWSED BY THE OFFICERS OF THE DEPARTMENT, FEW MAIL S WERE FOUND TO BE VERY INCRIMINATING IN TERMS OF DECISIONS REGA RDING SHIFTING OF PROFITS TO THE PARENT COMPANY, CONCEALMENT OF INCOM E BY MANIPULATING THE ACTUAL PROFITS TO CERTAIN PREDETER MINED/ DESIRED LEVELS, MANIPULATING SOFTWARE - VOICES ETC. AS SUCH , THE OFFICIAL MAIL CORRESPONDENCE ENTERED INTO BY THE EXECUTIVES OF NIPL, AS RECORDED IN THE SERVER, WAS REQUIRED TO BE PRODUCED . IT IS A MATTER OF RECORD THAT THE MAIL DUMP HAS BEEN WITHHELD DELI BERATELY FOR REASONS BEST KNOWN TO THE MANAGEMENT. III. THE DETAILS REGARDING MONTH WISE PRODUCTION OF MOBI LE HANDSETS, NUMBER HANDSETS EXPORTED, NUMBER OF HANDSETS SOLD I N DOMESTIC TARIFF AREA, UNDERLYING DOCUMENTS FOR SOFTWARE PRIC ING ETC, WERE SOUGHT FOR FROM TIME TO TIME. SO FAR THEY HAVE NOT BEEN SUPPLIED WITHOUT ANY VALID REASON. 40 ITA 3522/DEL/2013 IV. THE MONTH-WISE SOFTWARE INVOICES IMPOUNDED DURING T HE SURVEY CONTAINED CONSIDERATION IN TERMS OF US $. IT WAS RE QUESTED TO PRODUCE/ FILE THE INVOICE WISE CONSIDERATION IN INR AS RECORDED IN THE BOOKS OF ACCOUNT OF NIPL. NO SUCH DETAILS HAV E BEEN PRODUCED SO FAR. IT IS NOT OUT OF PLACE TO MENTION HERE THAT ALL -T HE DETAILS/ INFORMATION REQUESTED AS ABOVE IS READILY AVAILABLE WITH NIPL AND IT DOES NOT REQUIRE ANY EXTRA/ SPECIAL EFFORT TO FURNISH THE SAME. HOWEVER, IT WAS CHOSEN NOT TO COMPANY WITH THE REQUIREMENTS OF LAW FOR THE REASONS BEST KNOWN TO N IPL ONLY. IN YOUR LETTER DATED 18.01.2013 TOO IT WAS STATED THAT THE EMPLOYEES CO- OPERATED TO THE EXTENT POSSIBLE, QUALIFYING THE ,DEGREE OF CO-OPERATION AND THEREBY ADMITTING THAT IT WAS NOT FULL CO-OPERATION. 7.16. THEREFORE, THE DDIT, CHENNAI HAS CLEARLY DEMO NSTRATED THAT THERE WAS NON-COOPERATION OF EMPLOYEES IN FURNISHING THE INF ORMATION AND, THEREFORE, U/S 133A(6), DDIT, CHENNAI HAD POWERS TO RECORD STA TEMENTS U/S 131. EVEN OTHERWISE U/S 131(1A), THE DDIT, CHENNAI COULD EXER CISE THE POWERS. THIS SUB-SECTION READS AS UNDER: (1A) IF THE DIRECTOR GENERAL OR DIRECTOR OF JOINT DIRECTOR OR ASSISTANT DIRECTOR OR DEPUTY DIRECTOR, OR THE AUTHO RIZED OFFICER REFERRED TO IN SUB-SECTION (1) OF SECTION 132 BEFOR E HE TAKES ACTION UNDER CLAUSES (I) TO (V) OF THAT SUB-SECTION, HAS R EASON TO SUSPECT THAT ANY INCOME HAS BEEN CONCEALED, OR IS LIKELY TO BE C ONCEALED, BY ANY PERSON OR CLASS OF PERSONS, WITHIN HIS JURISDICTION , THEN, FOR THE PURPOSES OF MAKING ANY ENQUIRY OR INVESTIGATION REL ATING THERETO, IT SHALL BE COMPETENT FOR HIM TO EXERCISE THE POWERS C ONFERRED UNDER SUB-SECTION (1) ON THE INCOME-TAX AUTHORITIES REFER RED TO IN THAT SUB- SECTION, NOTWITHSTANDING THAT NO PROCEEDINGS WITH R ESPECT TO SUCH PERSON OR CLASS OF PERSONS ARE PENDING BEFORE HIM O R ANY OTHER INCOME-TAX AUTHORITY. 7.17. THESE POWERS ARE GIVEN TO SPECIFIC AUTHORITIE S FOR MAKING ANY INQUIRY OR INVESTIGATION RELATING TO INCOME CONCEALED. IN T HE PRESENT CASE MAIN THRUST OF ENTIRE ENQUIRY WAS TO FIND OUT TRUE IMPORT OF PA YMENTS MADE BY ASSESSEE 41 ITA 3522/DEL/2013 TO NOKIA CORPORATION AND, ACCORDINGLY TO FIND OUT T HE TAX DEDUCTIBLE AT SOURCE. 7.18. THE ASSESSEE HAS ALSO SUBMITTED THAT THE STAT EMENT OF EX-EMPLOYEE MR. JINTENDRA AGARWAL, AUDITOR, BEING NOT PRESENT A T THE TIME OF SURVEY, COULD NOT BE RECORDED. IN OUR OPINION, THIS PLEA D ESERVES TO BE REJECTED AT THE VERY OUTSET, BECAUSE ONCE THE POWERS ARE EXERCISED U/S 131(1A) IN ORDER TO GATHER THE INFORMATION, THE DESIGNATED AUTHORITIES COULD ISSUE SUMMONS TO ANY PERSON. DDIT IS ONE OF THE DESIGNATED AUTHORITY AND, THEREFORE, NO IRREGULARITY/ ILLEGALITY CAN BE IMPUTED. 7.19. IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT THE RE WAS NO ILLEGALITY IN CARRYING OUT SURVEY AND THE STATEMENTS RECORDED U/S 131 AT CHENNAI WERE VALIDLY RECORDED. 8. NOW THE NEXT ISSUE IS IN REGARD TO THE EVIDENTIA RY VALUE OF STATEMENTS RECORDED DURING SURVEY. AS WE HAVE ALREADY HELD THA T SURVEY WAS VALIDLY CONDUCTED, THEREFORE, THIS OBJECTION OF ASSESSEE DO ES NOT SURVIVE. HOWEVER, EVEN OTHERWISE, IT IS WELL SETTLED LAW, AS HELD IN THE CASE OF POORAN MAL (SUPRA) AND DR. P:RATAP SINGH (SUPRA), THAT EVIDENC E COLLECTED DURING ILLEGAL SURVEYS ALSO CAN BE RELIED UPON. WE ARE NOT INCLINE D TO ACCEPT THE PLEA OF LD. AUTHORISED REPRESENTATIVE ON THE GROUND OF BREACH O F FUNDAMENTAL RIGHT OF PRIVACY BECAUSE OF THE DECISION OF HONBLE SUPREME COURT IN ABOVE CASES. 9. THE NEXT OBJECTION OF LD. COUNSEL FOR THE ASSESS EE IS THAT STATEMENT ON OATH COULD NOT BE RECORDED IN COURSE OF SURVEY. THE ASSESSEE HAS RELIED ON VARIOUS CASE LAWS WHICH WE HAVE CONSIDERED IN THE S UBMISSIONS OF ASSESSEE. HOWEVER, WE FIND THAT NOW THIS ISSUE IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DR. DINESH JAIN (S UPRA) AND, THEREFORE, THIS OBJECTION RAISED BY ASSESSEE DOES NOT SURVIVE. 42 ITA 3522/DEL/2013 10. THE LAST OBJECTION OF ASSESSEE IS REGARDING CR OSS-EXAMINATION BEING NOT PROVIDED IN RESPECT OF VARIOUS STATEMENTS USED IN FRAMING THE ORDER U/S 201/201(1A). THE CHALLENGE IS ON THE GROUND THAT TH ERE WAS DENIAL OF PRINCIPLES OF NATURAL JUSTICE. 11. THE OBJECTION IS THAT ENTIRE PROCEEDINGS FROM T HE INITIATION OF SURVEY TO THE PASSING OF ORDER U/S 201/201(1A) WERE COMPLE TED WITHIN 41 DAYS AND SECONDLY ON THE GROUND THAT ASSESSEE HAD NOT BEEN O FFERED ANY OPPORTUNITY TO CROSS-EXAMINE THE EMPLOYEES WHOSE STATEMENTS HAD BE EN RELIED UPON BY AO FOR ARRIVING AT THE CONCLUSION THAT THE IMPUGNED P AYMENTS MADE BY NIPL TO NOKIA CORPORATION WERE ON ACCOUNT OF ROYALTY PAYMEN TS. THE REVENUES MAIN CONTENTION ON THIS COUNT IS THAT ASSESSEE WAS PROVIDED WITH ALL THE STATEMENTS TAKEN DURING THE COURSE OF SURVEY WHICH WERE MAINLY OF TECHNICAL PERSONS WHO EXPLAINED THE MANUFACTURING PROCESS, BU T SUBMISSION OF REVENUE IS THAT ASSESSEE NEVER OBJECTED OR POINTED OUT ANY ERROR IN THE STATEMENTS OF THESE EMPLOYEES AND THERE IS NO NEED FOR ANY CROSS- EXAMINATION OF THE TECHNICAL PERSONS, WHO WERE PRIM ARILY INCHARGE OF THE OPERATIONS. THE REVENUE HAS STRONGLY OBJECTED TO TH E TIME OF RAISING THE PLEA REGARDING CROSS-EXAMINATION BEING NOT PROVIDED TO E MPLOYEES BEFORE TRIBUNAL. 11.1. IN SUM AND SUBSTANCE THE SUBMISSION OF REVENU E IS THAT STATEMENTS HAD ONLY CORROBORATIVE VALUE AND THE CONCLUSION WAS NOT DRAWN SOLELY RELYING UPON THE SAID STATEMENTS AND, THEREFORE, THERE IS N O NEED FOR CROSS EXAMINATION OF EMPLOYEES. 12. BEFORE WE EMBARK UPON TO EXAMINE THE CONTENTION S OF BOTH THE PARTIES ON THIS COUNT, IT WOULD BE USEFUL TO DISCUSS THE SC OPE OF PRINCIPLES OF NATURAL JUSTICE. RULES OF NATURAL JUSTICE TRADITIONALLY COM PRISED OF THE RULES AUDI 43 ITA 3522/DEL/2013 ALTERM PARTEM AND NEMO JUDEX IN CAUSA SEA . RULE OF AUDI ALTERM PARTEM REQUIRES THE MAKER OF A JUDICIAL OR QUASI JUDICIAL DECISION TO GIVE PRIOR NOTICE OF THE DECISIONS TO PERSONS AFFECTED BY IT A ND AN OPPORTUNITY FOR THOSE PERSONS TO MAKE REPRESENTATIONS. NO MAN IS TO BE DE PRIVED OF HIS PROPERTY WITHOUT HIS HAVING AN OPPORTUNITY OF BEING HEARD. T HE OBJECT IS THAT AUTHORITY MUST DO ITS BEST TO ACT JUSTLY AND TO REACH JUST EN DS BY JUST MEANS. THIS RULE IS OF UNIVERSAL APPLICATION AND FOUNDED UPON THE PLAI NEST NATURAL JUSTICE. THERE IS NO GAINSAYING THAT AO MUST ACT IN GOOD FAITH AND GIVE FAIR HEARING TO ASSESSEE, FOR THAT IS A DUTY CAST UPON EVERY AUTHOR ITY WHO DECIDES ANYTHING. AUTHORITIES UNDER THE ACT HAVE BEEN GIVEN POWERS UN DER VARIOUS SECTIONS VIZ. 131, 132, 133A, 133B ETC. IN THE MANNER PRESCR IBED BY LAW. ALL THE INFORMATION OBTAINED BY THE AUTHORITIES ARE REQUIRE D TO BE PROVIDED TO ASSESSEE AND ALSO THE STATEMENTS AND FURTHER TO PRO VIDE OPPORTUNITY TO ASSESSEE AS WELL AS PERSONS WHOSE STATEMENTS WERE R ECORDED FOR CORRECTING OR CONTRADICTING ANY RELEVANT STATEMENT PREJUDICIAL TO THEIR VIEW. THE UNDERLYING PRINCIPLE IS THAT THERE SHOULD BE FAIR P LAY IN THE PROCESS OF DECISION MAKING. WHEN-EVER A CHALLENGE IS MADE TO T HE NON-ADHERENCE TO PRINCIPLES OF NATURAL JUSTICE, TWO BASIC ISSUES ARE INVOLVED:- (A) DOES THE RULE APPLIED TO A PARTICULAR SITUATION; A ND (B) IF SO, WHAT IS THE PRECISE CONTENT OF THE RULE IN THE SITUATION. 12.1. IT IS TO BE EXAMINED, WHETHER A RULE HAS BEEN OBSERVED WITH REFERENCE TO ABOVE TWO ISSUES OR NOT. THE FUNCTION OF COURT IS TO EXAMINE THE ACTIONS OF AUTHORITIES TO FIND OUT WHETHER, IN THE GIVEN CI RCUMSTANCES, THE PRINCIPLES OF NATURAL JUSTICE HAVE BEEN COMPLIED BY AUTHORITIE S OR NOT, BUT THE COURT CANNOT IMPOSE ITS OWN METHOD ON ADMINISTRATIVE OR E XECUTIVE AUTHORITIES, ELSE IT WOULD AMOUNT TO USURPATION OF POWERS OF AUT HORITIES. THE AUTHORITY IS 44 ITA 3522/DEL/2013 THE BEST JUDGE TO DECIDE THE EXTENT TO WHICH THE PR INCIPLES OF NATURAL JUSTICE HAVE TO BE APPLIED IN THE GIVEN CIRCUMSTANCES, THE FUNCTION OF COURT BEING LIMITED TO EXAMINE WHETHER SUBSTANTIAL JUSTICE HAS BEEN IMPARTED OR NOT. IT ENTIRELY DEPENDS ON THE NATURE OF ISSUE TO BE DETER MINED. DIPLOCK J. IN THE CASE OF R.V. DEPUTY INDUSTRIAL INJURIES COMMISSION ER, EX P. MOORE (1965) 1 Q.B. 456, SUMMARIZED THE COMMISSIONERS OBLIGATIO NS IN CONDUCTING A HEARING AS FOLLOWS: THE DEPUTY COMMISSIONER IS REQUIRED (A) TO CONSIDE R SUCH EVIDENCE RELEVANT TO THE QUESTION TO BE DECI DED AS ANY PERSON ENTITLED TO BE REPRESENTED WISHES TO PUT BEFORE HIM; (B) TO INFORM EVERY PERSON REPRESENTED OF ANY EVIDENCE' WHICH 'THE DEPUTY COMMISSIONER PROPOSES TO TAKE INTO CONSIDERATION, WHETHER SUCH 'EVIDENCE' BE PROFFERED BY ANOTHER PERSON REPRESENTED AT THE HEAR ING, OR IS DISCOVERED BY THE DEPUTY COMMISSIONER AS A RE SULT OF HIS OWN INVESTIGATIONS; (C) TO ALLOW EACH PERSON REPRESENTED TO COMMENT UPON ANY SUCH 'EVIDENCE AND , WHERE THE 'EVIDENCE' IS GIVEN ORALLY BY WITNESSES, TO PUT QUESTIONS TO THOSE WITNESSES; AND (D) TO ALLOW EACH PERSON REPRESENTED TO ADDRESS ARGUMENT TO HIM ON TH E WHOLE OF THE CASE. THIS IN THE CONTEXT OF THE ACT A ND THE REGULATIONS FULFILS THE REQUIREMENT OF THE SECOND RULE OF NATURAL JUSTICE TO LISTEN FAIRLY TO ALL SIDES. 12.2. WHETHER, THE DECISION BE BASED ON EVIDENCE OF SOME PROBATIVE VALUE, HE FURTHER HELD: ' [THE] TECHNICAL RULES OF EVIDENCE, HOWEVER, FORM NO PART OF THE RULES OF NATURAL JUSTICE. THE REQUIREME NT THAT A PERSON EXERCISING QUASI JUDICIAL FUNCTIONS MUST B ASE HIS DECISION ON EVIDENCE MEANS NO MORE THAN IT MUST BE BASED UPON MATERIAL WHICH TENDS LOGICALLY TO SHOW T HE EXISTENCE OR NON-EXISTENCE OF FACTS RELEVANT TO THE ISSUE TO BE DETERMINED, OR TO SHOW THE LIKELIHOOD OR UNLIKEL IHOOD OF THE OCCURRENCE OF SOME FUTURE EVENT THE OCCURREN CE OF WHICH WOULD BE RELEVANT. IT MEANS THAT HE MUST NOT SPIN A 45 ITA 3522/DEL/2013 COIN OR CONSULT AN ASTROLOGER, BUT HE MAY TAKE INTO ACCOUNT ANY MATERIAL WHICH, AS A MATTER OF REASON, HAS SOME PROBATIVE VALUE IN THE SENSE MENTIONED ABOVE. IF IT IS CAPABLE OF HAVING ANY PROBATIVE VALUE, 'THE WEIG HT TO BE ATTACHED TO IT IS A MATTER FOR THE PERSON TO WHO M PARLIAMENT HAS ENTRUSTED THE RESPONSIBILITY OF DECI DING THE ISSUE. THE SUPERVISORY JURISDICTION OF THE HIGH COURT DOES NOT ENTITLE IT TO USURP THIS RESPONSIBILITY AN D TO SUBSTITUTE ITS OWN VIEW FOR HIS.' 12.3. IN THIS CONTEXT WE REFER TO THE DECISION OF I TAT MUMBAI BENCH IN THE CASE OF GTC INDUSTRIES VS. ACIT 65 ITD 380, WHEREIN TRIBUNAL HAS ELABORATELY CONSIDERED THE ISSUE OF AFFORDING CROSS -EXAMINATION IN THOSE CASES WHERE THE EVIDENCE USED BY AO IS COLLATERAL/ SECONDARY IN NATURE. RELEVANT OBSERVATIONS ARE REPRODUCED HEREUNDER: 84. WE NOW DEAL WITH THE DICTUM :AUDI ALTERM PARTEM. WHILE ARGUING THE OPPORTUNITY ASPECT, SHRI DASTUR STATE D THAT THE PRINCIPLES OF NATURAL JUSTICE HAVE BEEN WAS NOT GIVEN TO THE A SSESSEE. TO SUPPORT THIS THE LEARNED COUNSEL RELIED ON PRECEDENTS. WE E XAMINE THE APPLICABILITY OF THE SAME IN THE FACTS OF THE PRESE NT CASE. 85. IN THE CASE OF VASANJI GHELA & CO. ( SUPRA ) THE COURT HELD : THE RULES OF NATURAL JUSTICE DO REQUIRE THAT NORMA LLY SPEAKING, IF THE STATEMENT OF A PERSON IS INTENDED TO BE USED AS EVI DENCE AGAINST A PARTY, IT MUST BE MADE AVAILABLE TO THE PARTY AGAINST WHOM IT IS INTENDED TO BE USED AND SUCH PARTY MUST BE GIVEN A FAIR OPPORTUNIT Y TO EXPLAIN THE SAME OR COMMENT ON IT. WHAT WOULD AMOUNT TO FAIR OP PORTUNITY WOULD DEPEND UPON THE FACTS AND CIRCUMSTANCES OF EACH CAS E. IF SUCH A PARTY MAKES A REQUEST TO BE ALLOWED TO CROSS-EXAMINE THE PERSON, WHO MADE THE STATEMENT, FOR THE PURPOSE OF MEETING THE STATE MENT OR WITH A VIEW TO COMMENTING THEREON, SUCH A REQUEST CANNOT, SAVE IN EXCEPTIONAL OR SPECIAL CASES, BE DENIED WITHOUT VIOLATING THE PRIN CIPLES OF NATURAL JUSTICE. 86. IN THE CASE OF V.K. BATCHA MOHIDEEN V. JOINT COMMERCIAL TAX OFFICER [1971] 28 STC 450 (MAD.) THE COURT HELD : 46 ITA 3522/DEL/2013 THE PRINCIPLES OF NATURAL JUSTICE HAVE A VERY WIDE AND EXTENSIVE FIELD FOR ACTION. THEY ENFOLD WITHIN THEIR NET THE ACTIVI TIES OF THE REVENUE IN PROBLEMS OF TAXATION AS WELL. THEY ARE NOT CIRCUMSC RIBED TO CIVIL ACTIONS, SINCE THEIR ARMS CAN EXTEND EVEN TO CORREC T ERRORS COMMITTED BY TAXING AUTHORITIES IN EXERCISE OF STATUTORY POWERS UNDER THE TAXATION LAWS OF THE STATE. 87. SHRI DESAI IN THIS CONNECTION INVITED OUR ATTENTION ON THE RATIO OF T.DEVASAHAYA NADAR V. CIT [1964] 51 ITR 20 (MAD.), WHEREIN IT WAS HELD : IT CANNOT BE LAID DOWN AS A GENERAL PROPOSITION OF LAW THAT THE INCOME- TAX DEPARTMENT CANNOT RELY UPON ANY EVIDENCE WHICH HAS NOT BEEN SUBJECTED TO CROSS-EXAMINATION. AN ITO OCCUPIES THE POSITION OF A QUASI-JUDICIAL TRIBUNAL AND IS NOT BOUND BY THE RUL ES OF THE EVIDENCE ACT, BUT HE MUST ACT IN CONSONANCE WITH NATURAL JUS TICE, AND ONE SUCH RULE IS THAT HE SHOULD NOT USE ANY MATERIAL AGAINST AN ASSESSEE WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY TO MEET IT. HE I S NOT BOUND TO DIVULGE THE SOURCE OF HIS INFORMATION. THERE IS NO DENIAL O F NATURAL JUSTICE IF THE ITO REFUSES TO PRODUCE AN INFORMANT FOR CROSS-EXAMI NATION THOUGH IF A WITNESS IS EXAMINED IN THE PRESENCE OF THE ASSESSEE , THE ASSESSEE MUST BE ALLOWED TO CROSS-EXAMINE HIM. THE RANGE OF NATUR AL JUSTICE IS WIDE AND WHETHER OR NOT THERE HAS BEEN VIOLATION OF NATU RAL JUSTICE WOULD DEPEND ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 88. IN THE CASE OF STATE OF PUNJAB V. BHAGAT RAM [1975] 1 SCC 155 (SC), THERESPONDENT WAS DISMISSED AS A RESULT OF DE PARTMENTAL ENQUIRY AND HE FILED A SUIT FOR DECLARATION THAT HIS DISMIS SAL WAS ILLEGAL ON THE GROUND THAT COPIES OF THE STATEMENTS RECORDED BY TH E VIGILANCE DEPARTMENT DURING PRELIMINARY ENQUIRY WERE NOT SUPP LIED. THE DISMISSAL WAS SET ASIDE BY THE TRIAL COURT AND THE DECISION WAS UPHELD BY THE COURT. THEREAFTER, THE STATE FILED APPEAL FO R THE CERTIFICATE. THE APEX COURT HELD THAT : UNLESS THE PREVIOUS STATEMENTS OF WITNESSES ARE SU PPLIED THE DISMISSED PERSON WILL NOT BE ABLE TO HAVE AN EFFECTIVE AND US EFUL CROSS- EXAMINATION AND THEREFORE, IT IS UNFAIR TO DENY THE GOVERNMENT SERVANT COPIES OF THE EARLIER STATEMENTS OF WITNESSES. SYNO PSIS OF THE STATEMENTS WILL NOT SATISFY THE REQUIREMENTS OF REASONABLE OPP ORTUNITY TO SHOW CAUSE AGAINST THE ACTION PROPOSED TO BE TAKEN. WE NOW COME TO THE CASES RELIED UPON BY THE REVENUE . 47 ITA 3522/DEL/2013 89. IN THE CASE OF MOHANLAL JITAMALJI PORWAL ( SUPRA ). IT WAS HELD AS UNDER (ATPAGE 488) : ENDS OF JUSTICE ARE NOT SATISFIED ONLY WHEN THE AC CUSED IN A CRIMINAL CASE IS ACQUITTED. THE COMMUNITY ACTING THROUGH THE STATE AND THE PUBLIC PROSECUTOR IS ALSO ENTITLED TO JUSTICE. THE CAUSE OF THE COMMUNITY DESERVES EQUAL TREATMENT AT THE HANDS OF THE COURT IN THE DISCHARGE OF ITS JUDICIAL FUNCTIONS. THE COMMUNITY OF THE STATE IS NOT A PERSONA-NON-GRATA WHOSE CAUSE MAY BE TREATED WITH DISDAIN. THE ENTIRE COMMUNITY IS AGGRIEVED IF THE ECONOMIC OFFENDERS WH O RUIN THE ECONOMY OF THE STATE ARE NOT BROUGHT TO BOOKS. A MU RDER MAY BE COMMITTED IN THE HEAT OF MOMENT UPON PASSIONS BEING AROUSED. AN ECONOMIC OFFENCE IS COMMITTED WITH COOL CALCULATION AND DELIBERATE DESIGN WITH AN EYE ON PERSONAL PROFIT REGARDLESS OF THE CONSEQUENCE TO THE COMMUNITY. A DISREGARD FOR THE INTEREST OF THE COMMUNITY CAN BE MANIFESTED ONLY AT THE COST OF FORFEITING THE TRUST AND FAITH OF THE COMMUNITY IN THE SYSTEM TO ADMINISTER JUSTICE IN AN EVEN HANDED MANNER WITHOUT FEAR OF CRITICISM FROM THE QUARTERS WHICH VIEW WHITE COLLAR CRIMES WITH A PERMISSIVE EYE UNMINDFUL OF TH E DAMAGE DONE TO THE NATIONAL ECONOMY AND NATIONAL INTEREST. 90. IN THE CASE OF KISHANLAL AGARWALLA ( SUPRA ). THE COURT HELD : ORDINARILY THE PRINCIPLE OF NATURAL JUSTICE IS THA T NO MAN SHALL BE A JUDGE IN HIS OWN CAUSE AND THAT NO MAN SHOULD BE CO NDEMNED UNHEARD. THIS LETTER DOCTRINE IS KNOWN AS AUDI ALTERAM PARTEM. IT IS ON THIS PRINCIPLE THAT NATURAL JUSTICE ENSURES THAT BOTH SI DES SHOULD BE HEARD FAIRLY AND REASONABLY. A PART OF THIS PRINCIPLE IS THAT IF ANY RELIANCE IS RECORD MUST BE PLACED ON EVIDENCE OR RECORD AGAINST A PERSON THEN THAT EVIDENCE OR RECORD MUST BE PLACED BEFORE HIM FOR HI S INFORMATION, COMMENT AND CRITICISM. THAT IS ALL THAT IS MEANT BY THE DOCTRINE OF, AUDI ALTERAM PARTEM. THAT NO PARTY SHOULD BE CONDEMNED UNHEARD. NO NATURAL JUSTICE REQUIRES THAT THERE SHOULD BE A KIN D OF A FORMAL CROSS- EXAMINATION. FORMAL CROSS-EXAMINATION IS PROCEDURAL JUSTICE. IT IS GOVERNED BY RULES OF EVIDENCE. IT IS THE CREATION O F COURTS AND NOT A PART OF NATURAL JUSTICE BUT OF LEGAL AND STATUTORY JUSTI CE.NATURAL JUSTICE CERTAINLY INCLUDES THAT ANY STATEMENT OF A PERSON B EFORE IT IS ACCEPTED AGAINST SOMEBODY ELSE, THAT SOMEBODY ELSE SHOULD HA VE AN OPPORTUNITY OF MEETING IT WHEATHER IT ( SIC ), BY WAY OF INTERROGATION OR BY WAY OF COMMENT DOES NOT MATTER. SO LONG AS THE PARTY CHARG ED HAS A FAIR AND REASONABLE OPPORTUNITY TO SEE, COMMENT AND CRITICIS E THE EVIDENCE, STATEMENT, OR RECORD ON WHICH THE CHARGE IS BEING M ADE AGAINST HIM, THE 48 ITA 3522/DEL/2013 DEMANDS AND THE TEST OF NATURAL JUSTICE ARE SATISFI ED. CROSS- EXAMINATION IN THAT SENSE IS NOT THE TECHNICAL CROSS-EXAMINATIO N IN A COURT OF LAW IN THE WITNESS BOX. 91. IN THE CASE OF SATELLITE ENGG. LTD. ( SUPRA ). THE JURISDICTIONAL HIGH COURT HAS HELD THAT : IT IS TRUE THAT THE DEPARTMENT MUST DISCLOSE EVERY INFORMATION TO THE PETITIONER IN WHICH THE DEPARTMENT INTEND TO RELY I N THE DEPARTMENTAL PROCEEDINGS. IF THE COPIES OF THE LETTERS CONTAININ G THE PRICE OFFERED WERE HANDED OVER TO THE PETITIONER WITH A SLIP PAST ED ON THE NAME OF THE INTENDED IMPORTER. FROM THIS MATERIAL, IT WAS FOR T HE PETITIONERS TO ESTABLISH THAT THE VALUE QUOTED IN THESE QUOTATIONS WAS NOT THE PROPER VALUE AND IN CASE THE DEPARTMENT IS COMPELLED TO GI VE THE NAME OR TO PRODUCE SUCH INTENDING IMPORTERS FOR CROSS-EXAMINAT ION IN DEPARTMENTAL PROCEEDINGS, IT WILL WELL-NIGH BE IMPOSSIBLE TOGETH ER ANY MATERIAL IN FUTURE. THEREFORE, IT CANNOT BE SAID THAT THERE WAS VIOLATION OF NATURAL JUSTICE SPECIALLY WHEN THE NAME OF THE EXPORTER SEN DING THE QUOTATIONS WAS DISCLOSED TO THE PETITIONER. 92. IN THE CASE OF KANUNGO & CO. ( SUPRA ). IT WAS HELD : . . . THE COMPLAINT OF THE APPELLANT NOW IS THAT A LL THE PERSONS FROM WHOM ENQUIRIES WERE ALLEGED TO HAVE BEEN MADE BY TH E AUTHORITIES SHOULD HAVE BEEN PRODUCED TO ENABLE IT TO CROSS-EXA MINE THEM. IN OUR OPINION, THE PRINCIPLES OF NATURAL JUSTICE D O NOT REQUIRE THAT IN MATTERS LIKE THIS THE PERSONS WHO HAVE BEEN GIVEN I NFORMATION SHOULD BE EXAMINED IN THE PRESENCE OF THE APPELLANT OR SHOULD BE ALLOWED TO BE CROSS-EXAMINED BY THEM ON THE STATEMENT MADE BEFORE THE CUSTOM AUTHORITIES. ACCORDINGLY, WE HOLD THAT THERE IS NO FORCE IN THE THIRD CONTENTION OF THE APPELLANT. THERE IS NO FORCE IN T HE SECOND POINT BECAUSE WE DO NOT READ THE IMPUGNED ORDER AS HAVING WRONGLY PLACED THE BURDEN ON THE APPELLANT. WHAT THE IMPUGNED ORDE R DOES IS THAT IT REFERS TO THE EVIDENCE ON THE RECORD WHICH MILITATE S AGAINST THE VERSION OF THE APPELLANT AND THEN STATES THAT THE APPELLANT HAD NOT BEEN ABLE TO MEET THE INFERENCES ARISING THEREFROM. IN OUR OPINI ON, THE HIGH COURT WAS RIGHT IN HOLDING THAT THE BURDEN OF PROOF HAD S HIFTED ON TO THE APPELLANT AFTER THE CUSTOM AUTHORITIES HAD INFORMED APPELLANT OF THE RESULTS OF THE ENQUIRIES AND INVESTIGATIONS. 93. IN THE CASE OF TULSIRAM PATEL ( SUPRA ). THE APEX COURT HAS HELD THAT: 49 ITA 3522/DEL/2013 SO FAR AS THE AUDI ALTERAM PARTM RULE IS CONCERNED, BOTH IN ENGLAND AND IN INDIA, IT IS WELL-ESTABLISHED THAT WHERE A R IGHT TO A PRIOR NOTICE AND AN OPPORTUNITY TO BE HEARD BEFORE AN ORDER IS P ASSED WOULD OBSTRUCT THE TAKING OF PROMPT ACTION, SUCH A RIGHT CAN BE EX CLUDED. THIS RIGHT CAN ALSO BE EXCLUDED WHERE THE NATURE OF THE ACTION TO BE TAKEN, ITS OBJECT AND PURPOSE AND THE SCHEME OF THE RELEVANT STATUTOR Y PROVISIONS WARRANT ITS EXCLUSION; NOR CAN THE AUDI ALTERAM PARTEM RULE BE INVOKED IF IMPORTING IT WOULD HAVE THE EFFECT OF PARALYSING TH E ADMINISTRATIVE PROCESS OR WHERE THE NEED FOR PROMPTITUDE OR THE UR GENCY OF TAKING ACTION SO DEMANDS. 94. DCW LTD.S CASE ( SUPRA ), PARA 11 OF THE SAID DECISION (P. 237) IS REPRODUCED HERE AS UNDER : THE SUPREME COURT HAD AN OCCASION TO CONSIDER THE APPLICABILITY OF THE PRINCIPLES OF NATURAL JUSTICE IN A RECENT CASE IN R.S. DASS V. UNION OF INDIA AIR 1967 SC 593. THE SUPREME COURT IN CHAIRMAN, BOARD OF MINING EXAMINATION V. RAMJEE AIR 1977 SC 965 HELD AS FOLLOWS : NATURAL JUSTICE IS NO UNRULY HORSE, NO LURKING LAN D MINE, NOR A JUDICIAL CURE ALL. IF FAIRNESS IS SHOWN BY THE DECI SION MAKER TO THE MAN PROCEEDED AGAINST, THE FORM, FEATURES AND THE F UNDAMENTALS OF SUCH ESSENTIAL PROCESSUAL PROPRIETY BEING CONDIT IONAL BY THE FACTS AND CIRCUMSTANCES OF SUCH SITUATION, NO BREAC H OF NATURAL JUSTICE CAN BE COMPLAINED OF. UNNATURAL EXPANSION O F NATURAL JUSTICE, WITHOUT REFERENCE TO THE ADMINISTRATIVE RE ALITIES AND OTHER FACTORS OF A GIVEN CASE, CAN BE EXASPERATING. WE CA N NEITHER BE FINICAL NOR FINANCIAL BUT SHOULD BE FLEXIBLE YET FI RM IN THIS JURISDICTION. . . . 95. SRI DESAI SUBMITTED THAT THE RULES OF NATURAL JUSTI CE ARE NOT RIGID RULES, THEY ARE FLEXIBLE AND THEIR APPLICATION DEPE NDS UPON THE SETTING AND BACKGROUND OF STATUTORY PROVISION, NATURE OF TH E RIGHT WHICH MAY BE EFFECTED AND THE CONSEQUENCES WHICH MAY ENTAIL ITS APPLICATION DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IT W AS STRESSED THAT NATURAL JUSTICE IS MISTRESS AND NOT THE MASTER OF J USTICE. IT IS USED TO SUPPORT THE CAUSE OF JUSTICE. IT CAN NEVER BE USED TO DEFEAT THE CAUSE OF JUSTICE. SRI DASTUR POINTED OUT THAT THE APEX COURT IN K.T. SHADULI GROCERY DEALERS CASE ( SUPRA ) MADE IT CLEAR THAT CROSS-EXAMINATION, IF ASKED FOR, MUST BE GRANTED. IN THE CASE OF HIRA NATH MISHRA V. PRINCIPAL, RAJENDRA MEDICAL COLLEGE AIR 1973 SC 1260, THE SUPREME COURT CAME ACROSS WITH AN UNUSUAL SITUATION WHICH D EMANDED A HIGHLY PARTICULAR APPROACH. THE COURT WAS CONCERNED WITH T HE COMPLAINTS REGARDING MOLESTATION OF GIRL STUDENTS. IN EXCEPTIO NAL CASES THE 50 ITA 3522/DEL/2013 REQUIREMENT MAY BE WAIVED. THE CASE OF THE ASSESSEE DOES NOT FALL IN THE CATEGORY OF EXCEPTIONAL CASES. IN THE LIGHT OF CASES DISCUSSED HEREINBEFORE, IT WAS PLEADED THAT GREAT INJUSTICES GIVEN TO THE ASSESSEE. WE HAVE PERUSED THE DECISIONS CITED BEFORE US. THE JUDICIAL CLIMATE ON THIS POINT IS THICKLY CLOUDED WITH PLETHORA OF PREC EDENTS. THIS POINT HAS CREATED CHAOS IN JUDICIAL COSMOS. THE RESULT IS THA T, AS WAS OBSERVED IN THE CASE OF KISHANLAL AGARWALLA ( SUPRA ), THE DANGER OF CONFUSION HAS BECOME REAL AND NATURAL JUSTICE IS ON THE MISLEADIN G ROAD OF SENTIMENTAL POTENTIATES. WE RECOLLECT THE FAMOUS SAYING OF JUSTICE BERNARD B OTEIN : THE LAW WILL NEVER BE ENTIRELY CLEAR TO ANY JUDGE, JUST AS A BEAUTIFUL WOMAN IS ALWAYS A BIT OF MYSTERY TO HER L OVER. WERE IT OTHERWISE EACH WOULD LOSE PART OF HER CHARM. BUT TH E WISE JUDGE, LIKE THE WISE LOVER, WILL BE THE MASTER OF HIS TRUE LOVE, ALTHOUGH HE MAY NOT UNDERSTAND HER COMPLETELY AND THOUGH SHE IS SOMETIMES TOO DIFFICULT FOR HIM. - TRIAL JUDGE (AT PAGE 27) 96. THE APPELLANTS BASIC CONTENTION IS THAT THE STATEM ENT OF WITNESSES AND MATERIALS WHICH ARE RELIED UPON BY THE ASSESSIN G OFFICER IN THE ASSESSMENT ORDER TO REACH THE CONCLUSIONS AND FINDI NGS WHICH ARE ADVERSE TO THE ASSESSEE SHOULD BE DISCLOSED TO THE APPELLANT AND THE WITNESSES SHOULD BE OFFERED FOR CROSS-EXAMINATION. SUPREME COURT IN THE CASE OF SURAJ MALL MOHTA & CO. ( SUPRA ) LAID DOWN : THE ASSESSEE ORDINARILY HAS THE FULLEST RIGHT TO I NSPECT THE RECORDS AND ALL DOCUMENTS AND MATERIALS THAT ARE TO BE USED AGA INST HIM. UNDER THE PROVISIONS OF SECTION 37 OF THE INDIAN INCOME-TAX A CT THE PROCEEDINGS BEFORE THE INCOME-TAX OFFICER ARE JUDICIAL PROCEEDI NGS AND ALL THE INCIDENTS OF SUCH JUDICIAL PROCEEDINGS HAVE TO BE O BSERVED BEFORE THE RESULT IS ARRIVED AT. IN OTHER WORDS, THE ASSESSEE WOULD HAVE A RIGHT TO INSPECT THE RECORD AND ALL RELEVANT DOCUMENTS BEFOR E HE IS CALLED UPON TO LEAD EVIDENCE IN REBUTTAL. 97. IN THE CASE OF K.T. SHADULI GROCERY DEALER ( SUPRA ), IT WAS HELD (AT P.1631) : . . . THE USUAL MODE RECOGNIZED BY LAW FOR PROVING FACT IS BY PRODUCTION OF EVIDENCE AND EVIDENCE INCLUDES ORAL EVIDENCE OF WITNESSES. THE OPPORTUNITY TO PROVE THE CORRECTNESS OF COMPLETENES S OF THE RETURN WOULD, THEREFORE, NECESSARILY CARRY WITH IT THE RIG HT TO EXAMINE 51 ITA 3522/DEL/2013 WITNESSES AND THAT WOULD INCLUDE EQUALLY THE RIGHT TO CROSS-EXAMINE WITNESSES EXAMINED BY THE SALESTAX OFFICER. HERE IN THE PRESENT CASE THE RETURN FILED BY THE ASSESSEE APPEARED TO THE STO TO BE INCORRECT AND INCOMPLETE BECAUSE CERTAIN SALES APPEARING IN THE B OOKS OF HAZI USMANKUTTY AND OTHER WHOLESALE DEALERS WERE NOT SHO WN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE STO RELIED ON THE E VIDENCE FURNISHED BY THE ENTRIES IN THE BOOKS OF ACCOUNT OF HAZI USMANKU TTY AND OTHER WHOLESALE DEALERS FOR THE PURPOSE OF COMING TO THE CONCLUSION THAT THE RETURN FILED BY THE ASSESSEE WAS INCORRECT OR INCOM PLETE. PLACED IN THESE CIRCUMSTANCES, THE ASSESSEE COULD PROVE THE CORRECT NESS AND COMPLETENESS OF HIS RETURN ONLY BY SHOWING THAT THE ENTRIES IN THE BOOKS OF ACCOUNT OF HAZI USMANKUTTY AND OTHER WHOLESALE D EALERS WERE FALSE, BOGUS OR MANIPULATED AND THAT THE RETURN SUBMITTED BY THE ASSESSEE SHOULD NOT BE DISBELIEVED ON THE BASIS OF SUCH ENTR IES, AND THIS OBVIOUSLY, THE ASSESSEE COULD NOT DO, UNLESS HE WAS GIVEN AN OPPORTUNITY OF CROSS-EXAMINING HAZI USMANKUTTY AND OTHER WHOLESALE DEALERS WITH REFERENCE TO THEIR ACCOUNTS. SINCE THE EVIDENTIARY MATERIAL PROCURED FROM OR PRODUCED BY HAZI USMANKUTTY AND OT HER WHOLESALE DEALERS WAS SOUGHT TO BE RELIED UPON FOR SHOWING TH AT THE RETURN SUBMITTED BY THE ASSESSEE WAS INCORRECT AND INCOMPL ETE THE ASSESSEE WAS ENTITLED TO AN OPPORTUNITY TO HAVE HAZI USMANKU TTY AND OTHER WHOLESALE DEALERS SUMMONED AS WITNESSES FOR CROSS-E XAMINATION. IT CAN HARDLY BE DISPUTED THAT CROSS-EXAMINATION IS ONE OF THE MOST EFFICACIOUS METHODS OF ESTABLISHING TRUTH AND EXPOSING FALSEHOO D. HERE, IT WAS NOT DISPUTED ON BEHALF OF THE REVENUE THAT THE ASSESSEE IN BOTH CASES APPLIED TO THE STO FOR SUMMONING HAZI USMANKUTTY AND OTHER WHOLESALE DEALERS FOR CROSS-EXAMINATION BUT HIS APPLICATION W AS TURNED DOWN BY THE STO. THIS ACT OF THE STO IN REFUSING TO SUMMON HAZI USMANKUTTY AND OTHER WHOLESALE DEALERS FOR CROSS-EXAMINATION B Y THE ASSESSEE CLEARLY CONSTITUTED INFRACTION OF THE RIGHT CONFERR ED ON THE ASSESSEE BY THE SECOND PART OF THE PROVISO AND THAT VITIATED TH E ORDERS OF ASSESSMENT MADE AGAINST THE ASSESSEE. 98. IT IS PERTINENT TO NOTE THAT IN THE CASE OF M.K. THOMAS ( SUPRA ), IT WAS HELD THAT THE DECISION IN K.T. SHADULI GROCERY DEALERS CASE ( SUPRA ), CANNOT BE UNDERSTOOD AS RECOGNISING A RIGHT OF CROS S-EXAMINATION AS AN INVARIABLE ATTRIBUTE OF THE REQUIREMENTS OF REASONA BLE OPPORTUNITY. THE APEX COURT HAS STATED THE RULE WITH SUFFICIENT ELAS TICITY AND AMPLITUDE AS TO MAKE THE RIGHT DEPEND ON THE TERMS OF THE STA TUTE, THE NATURE OF THE PROCEEDINGS OR OF THE FUNCTION EXERCISED, THE CONDU CT OF THE PARTY AND THE CIRCUMSTANCES OF THE CASE. 52 ITA 3522/DEL/2013 99. WHETHER IN A PARTICULAR CASE THE PARTICULAR PARTY SHOULD HAVE THE RIGHT TO CROSS-EXAMINE OR NOT DEPENDS UPON THE FACT S AND CIRCUMSTANCES OF A PARTICULAR CASE. THIS IS SO, BECAUSE THE RIGHT TO CROSS-EXAMINE IS NOT NECESSARILY A PART OF REASONABLE OPPORTUNITY. THIS VIEW WAS TAKEN BY THE CALCUTTA HIGH COURT IN THE CASE OF MANINDRA NATH CHATTERJEE ( SUPRA ). THUS IN A GIVEN CASE THE RULE OF AUDI ALTERAM PARTEM MAY IMPOST A REQUIREMENT THAT WITNESSES WHOSE STATEMENT S ARE SOUGHT TO BE RELIED UPON BY THE AUTHORITY HOLDING THE ENQUIRY SH OULD BE PERMITTED TO BE CROSS-EXAMINED BY THE PARTY AFFECTED WHILE IN SO ME OTHER CASE IT MAY NOT. 100. IN THE CASE OF KISHANCHAND CHELLARAM ( SUPRA ), THE APEX COURT WAS CONCERNED WITH THE EVIDENCE WHICH WAS TO BE USE D AGAINST THE ASSESSEE. THIS WAS IN THE FORM OF LETTER FROM THE M ANGER OF A BANK THROUGH WHICH MONEY WAS REMITTED. THIS LETTER WAS N OT SHOWN TO THE ASSESSEE. THEREFORE, EVIDENCE WAS HELD NOT TO BE AD MISSIBLE. IT WAS HELD THAT OPPORTUNITY TO CONTROVERT SHOULD BE GIVEN TO T HE ASSESSEE. 101. IN THE CASE OF DR. RASH LAL YADAV ( SUPRA ), IT WAS HELD : THE CONCEPT OF NATURAL JUSTICE IS NOT A STATIC ONE BUT IS AN EVER EXPANDING CONCEPT. IN THE INITIAL STAGES IT WAS THO UGHT THAT IT HAD ONLY TWO ELEMENTS, NAMELY, ( I ) NO ONE SHALL BE A JUDGE IN HIS OWN CAUSE, AND ( II ) NO ONE SHALL BE CONDEMNED UNHEARD. WITH THE PASSA GE OF TIME A THIRD ELEMENT WAS INTRODUCED, NAMELY OF PROCEDURAL REASONABLENESS BECAUSE THE MAIN OBJECTIVE OF THE REQUIREMENT OF RU LE OF NATURAL JUSTICE IS TO PROMOTE JUSTICE AND PREVENT ITS MISCARRIAGE. 102. IN THE CASE OF MAHENDRA ELECTRICALS LTD. ( SUPRA ), IT WAS HELD THAT : THE OPPORTUNITY TO CROSS-EXAMINE THE WITNESS WHO H AS MADE ADVERSE REPORT SHOULD NOT BE DENIED, TO THE OPPOSITE PARTY. 103. THE CONCEPT AND CONTENTS OF NATURAL JUSTICE GO ON C HANGING. NATURAL JUSTICE IS A LIVING ORGANISM, ADVANCED FROM TIME TO TIME. COURTS ARE GIVING NEW DIMENSIONS TO THE PRINCIPLES OF NATU RAL JUSTICE. THE PRINCIPLES EMBODIED REFLECT THE VALUE OF THE SOCIET Y ACCEPTED FOR TIME BEING. THE CHANGE IS A FACT OF LIFE. EVERY LIVING T HING TAKES NEW SHAPE, NEW DIMENSION WITH THE FLUX OF TIME. HONBLE SUPREM E COURT HAS OBSERVED IN 44 STC 61 ( SIC ) : IT MUST BE REMEMBERED THAT LAW IS NOT A MAUSOLEUM. IT IS NOT AN ANTIQUE TO BE TAKEN DOWN, DUSTED, ADMIRED AND PUT B ACK ON THE SHELF. IT 53 ITA 3522/DEL/2013 IS RATHER LIKE AND OLD BUT VIGOROUS TREE, HAVING IT S ROOTS IN HISTORY YET CONTINUOUSLY TAKING NEW GRAFTS AND PUTTING OUT NEW SPROUT AND OCCASIONALLY DROPPING DEAD WORDS. IT IS ESSENTIALLY A SOCIAL PROCESS, THE END PRODUCT OF WHICH IS JUSTICE AND HENCE, IT MUST KEEP ON GROWING AND DEVELOPING WITH CHANGING SOCIAL CONCEPTS AND VALUES . OTHERWISE, THERE WILL BE ESTRANGEMENT BETWEEN LAW AND JUSTICE AND LA W WILL CEASE TO HAVE LEGITIMACY. 104. NO RIDDLE IS MORE DIFFICULT TO SOLVE, NONE HAS MOR E PERSISTENTLY ENGAGED THE ATTENTION OF THOUGHTFUL MIND, SAYS ALL EN, THAN THE PROBLEM OF THE NATURAL SENSE OF JUSTICE. WE HAVE CAREFULLY CONSIDERED THE PROFILE OF THE SUBJECT IN THE LIGHT OF THE LATEST DEVELOPME NTS. PRINCIPLES OF JUSTICE PROHIBIT, DETERMINATION WITHOUT HEARING. [T ERMINER SANS OVER] SIMILARLY, HEARING WITHOUT DETERMINATION [OVER SANS TERMINER] IS ALSO INTERDICTED BY THE FINER NORMS OF JUSTICE. THAT ALL IS REQUIRED IS IMPARTIAL AND FAIR HEARING, AND DETERMINATION OF DISPUTES WIT H UTMOST PROMPTITUDE. THE QUESTION WHETHER OR NOT ANY RULES OF NATURAL JUSTICE HAD BEEN CONTRAVENED, SHOULD BE DECIDED NOT UNDER A NY PRECONCEIVED NOTIONS BUT IN THE LIGHT OF THE STATUTORY RULES AND PROVISIONS. THE VIOLATION OR OTHERWISE OF ANY RULE OF NATURAL JUSTI CE MUST BE A MATTER OF SUBSTANCE NOT OF MERE FORM. IT IS IMPORTANT TO KEEP INMIND THE CAVEAT ISSUED BY THE APEX COURT AIR 1977 SC 965 THAT UNNAT URAL EXPANSION OF NATURAL JUSTICE, WITHOUT REFERENCE TO THE ADMINISTR ATIVE REALITIES AND OTHER FACTORS OF A GIVEN CASE, CAN BE EXASPERATING. 105. IN OUR OPINION RIGHT TO CROSS-EXAMINE THE WITNESS W HO MADE ADVERSE REPORT, IS NOT AN INVARIABLE ATTRIBUTE OF T HE REQUIREMENT OF THE DICTUM, AUDI ALTERAM PARTEM. THE PRINCIPLES OF NATURAL JUSTICE DO NOT REQUIRE FORMAL CROSS-EXAMINATION. FORMAL CROSS-EXAM INATION IS A PART OF PROCEDURAL JUSTICE. IT IS GOVERNED BY THE RULES OF EVIDENCE, AND IS THE CREATION OF COURT. IT IS PART OF LEGAL AND STATUTOR Y JUSTICE, AND NOT A PART OF NATURAL JUSTICE, THEREFORE, IT CANNOT BE LAID DO WN AS A GENERAL PROPOSITION OF LAW THAT THE REVENUE CANNOT RELY ON ANY EVIDENCE WHICH HAS NOT BEEN SUBJECTED TO CROSS-EXAMINATION. HOWEVE R, IF A WITNESS HAS GIVEN DIRECTLY INCRIMINATING STATEMENT AND THE ADDI TION IN THE ASSESSMENT IS BASED SOLELY OR MAINLY ON THE BASIS O F SUCH STATEMENT, IN THAT EVENTUALITY IT IS INCUMBENT ON THE ASSESSING O FFICER TO ALLOW CROSS- EXAMINATION. ADVERSE EVIDENCE AND MATERIAL, RELIED UPON IN THE ORDER, TO REACH THE FINALITY, SHOULD BE DISCLOSED TO THE ASSE SSEE. BUT THIS RULE IS NOT APPLICABLE WHERE THE MATERIAL OR EVIDENCE USED IS OF COLLATERAL NATURE. 54 ITA 3522/DEL/2013 106. ADVERTING TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF THE C LANDESTINE PREMIUM ALLEGED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON TH E SALE OF CIGARETTES. THE FACTUM OF THE PREMIUM COLLECTION IS MAINLY BASE D ON THE EDIFICE OF THE FOLLOWING FACTS: ( I ) ANALYSIS OF THE ASSESSEES FINANCE RESULTS REVEAL ED THAT THE ASSESSEE SUSTAINED LOSS FROM SALE OF CIGARETTES, TO THE TU NE OF RS. 20,59,57,913. ( SEE PARA-6); ( II ) INVOICE PRICE OF THE CIGARETTES AS REFLECTED BY T HE ASSESSEE IN ITS RECORD WAS LESS THAN THE MANUFACTURING COST. ( SEE PARA-7); ( III ) IMPACT OF EXCISE DUTY ON THE TRADE, AND THE OBSER VATION OF THE TECHNICAL STUDY GROUP OF CENTRAL EXCISE TARIFF, 198 5. ( SEE PARAS-8 AND 9); ( IV ) TWIN BRANDING SYSTEM. ( SEE PARAS 10, 11, 12 AND 13). 107. IT IS RELEVANT TO SEE THAT HOW THE AMOUNT OF PREMIU M WAS CALCULATED. ON WHAT BASIS IT WAS WORKED OUT. WE FIN D THAT THE ENTIRE CALCULATION [AS GIVEN ON PAGE NO. G-22A, OF THE ASS ESSMENT ORDER] IS BASED ON THE TWINBRANDING PRINCIPLE . FIRST THE DIFFERENCE BETWEEN THE EX-FACTORY PRICE OF A PARTICULAR BRAND AND ITS HIGH PRICE TWIN WAS WORKED OUT. AMOUNT SO ARRIVED AT WAS MULTIPLIED BY THE VOLUME. RESULTANTLY CAME THE FIGURE OF RS. 29,11,68,078. OU T OF THAT RS. 2,91,16,807 [10 PER CENT] GOT DEDUCTED. IT WAS ATTR IBUTED TO THE SHARE OF WBS WHO WERE PRIVY TO SUCH CLANDESTINE OPERATIONS. FINALLY A SUM OF RS. [29,11,68,078 - 2,91,16,807] = RS. 26,20,51,271 ROUNDED OFF TO RS. 26,20,51,000 ADDED IN THE TOTAL INCOME. 108. TO SUPPORT THE ADDITION ON ACCOUNT OF PREMIUM RECOU RSE WAS MADE TO THE PRICING AND MARKETING POLICIES, ADOPTED BY T HE ASSESSEE AND OTHER INCIDENTAL DETAILS. MODUS OPERANDI WAS EXAMINED. IT WAS FOUND THAT ( I ) LARGE AMOUNT WAS REMITTED BY DIFFERENT UNRELATED AND UNCONNECTED WBS, IN THE FORM OF DEMAND DRAFTS, IN FICTITIOUS N AMES TO BOMBAY, CALCUTTA, DELHI, ETC., AND THESE DEMAND DRAFTS WERE ENCASHED EITHER THROUGH BANK ACCOUNT STANDING IN THE SAME NAME AS T HAT OF THE PAYEES OR ELSE WERE DISCOUNTED. ( II ) THE ADVERTISEMENT EXPENSES OF THE ASSESSEE-COMPAN Y WERE INCURRED THROUGH THESE SECRET BANK ACCOUNTS. ( III ) ASSESSEE-COMPANY DONATED THE FUNDS OUT OF THESE S ECRET BANK ACCOUNTS, VIZ., DONATION TO METHODIST CHURCH OUT OF TRANSFER OF FUN DS FROM THE A/C. OF H.K. PATEL (IN ASSESSMENT YEAR 198 4-85) AND DONATION TO THE FESTIVAL OF INDIA COMMITTEE OUT OF TRANSFER OF FUNDS FROM THE A/C. 55 ITA 3522/DEL/2013 OF SHREE ASSOCIATED [CURRENT A/C. NO. 1724 IN INDIA N OVERSEAS BANK, BANDRA WEST]. THIS AMOUNT WAS GIVEN AT THE BEHEST O F SRI SANJAY DALMIA, PRESIDENT- CUM -DIRECTOR-GENERAL OF THE COMPANY. ( IV ) ONE OF SUCH BANK A/C. WAS IN THE NAME OF MOONLIGH T FINANCE. THIS WAS WITH THE PUNJAB & SIND BANK, SCINDIA HOUSE BRAN CH, NEW DELHI. THE ACCOUNT HOLDER GIVEN THE FOLLOWING ADDRESS : B-72, HIMALAYA HOUSE (7TH FLOOR) 23-KASTURBA GANDHI MARG, NEW DELHI. [CURRENT A/C. NO. 787] THIS WAS ALSO THE OFFICE ADDRESS OF MR. UMESH KHAIT AN, SITTING DIRECTOR OF THE ASSESSEE-COMPANY. ( V ) AMOUNTS IN THE SHAPE OF COMMISSIONS, PROFITS ON S ALE OF GOODS OTHER THAN CIGARETTES, TECHNICAL AND SUPERVISION CHARGES, ETC., WERE REINTRODUCED IN THE ASSESSEES A/C. BY MEANS OF HAV ALA ENTRIES. IN VIEW OF THE ABOVE, ASSESSING OFFICER CONCLUDED T HAT ASSESSEE- COMPANY HAD NEXUS WITH THE SECRET BANK A/CS. THUS HE SUPPORTED THE PREMIUM THEORY WITH REFERENCE TO THE ABOVESAID FA CTS. OUT OF THE TOTAL AMOUNT OF ADDITION ON ACCOUNT OF PREMIUM, ASSESSING OFFICER DEDUCTED, INTER ALIA , THE FOLLOWING : ( I ) BOGUS INCOME SHOWN FROM COMMISSIONS, TRADING AND SUPERVISION CHARGESRS. 8,66,32,171 ( II ) ADVERTISEMENT EXPENSES OUTSIDE BOOKS RS. 2,60,00, 000 109. THE MATERIAL GATHERED BY THE DRI IN THE COURSE OF S EARCH WHICH WAS PASSED ON THE INCOME-TAX DEPARTMENT GIVEN THE C LUE. ASSESSING OFFICER MADE INDEPENDENT INVESTIGATION. THE ANALYSI S OF THE FINANCIAL RESULTS REVEALED THAT THE ASSESSEE SUSTAINED LOSS F ROM THE SALE OF CIGARETTES TO THE TUNE OF RS. 20,59,57,973. BESIDES THE INVOICE PRICE OF THE CIGARETTES AS REFLECTED IN THE RECORDS WAS LESS THAN THE MANUFACTURING COST. THESE FACTS WERE EXAMINED WITH REFERENCE TO T HE OBSERVATION OF THE TECHNICAL STUDY GROUP OF CENTRAL EXCISE TARIFF, 198 5. THE IMPACT OF THE EXCISE DUTY ON THE TRADE WAS CONSIDERED. THE OU TCOME OF THE ENQUIRY INDICATED THAT THE PREMIUM WAS GENERATED BY THE USE OF THE TWIN BRANDING SYSTEM. THE BASIS OF ADDITION WAS T HE DIFFERENCE BETWEEN THE EX-FACTORY PRICE OF A PARTICULAR BRAND AND ITS HIGH PRICE TWIN. THERE WAS NO ADDITION ON ACCOUNT OF ALLEGED B OGUS INCOME SHOWN FROM COMMISSIONS, TRADING AND SUPERVISION CHARGES. SIMILARLY ADVERTISEMENT EXPENSES FOUND OUTSIDE THE BOOKS WERE NOT CONSIDERED FOR THE PURPOSE OF ADDITION. THESE AMOUNTS WERE CON SIDERED FOR THE PURPOSE OF DEDUCTION FROM THE SO-CALLED CLANDESTINE COMMISSION. IN SHORT, THE CASE OF THE REVENUE IS, THAT THE ASSESSE E-COMPANY BY USING 56 ITA 3522/DEL/2013 TWIN BRANDING SYSTEM, COLLECTED CLANDESTINE PREMIUM ON THE SALE OF CIGARETTES. THIS COMMISSION WAS COLLECTED THROUGH T HE WBS. IT WAS KEPT IN THE SECRET BANK ACCOUNTS. IT WAS UTILISED F OR MEETING THE EXPENDITURE, VIZ., ADVERTISEMENT, DONATION, ETC. SOME AMOUNT WAS RE- INTRODUCED IN THE ASSESSEES ACCOUNT BY MEANS OF HA VALA ENTRIES AND REFLECTED AS COMMISSION AND TRADING INCOME. 110. FROM THE AFORESAID DISCUSSION, IT IS CLEAR, THAT AD DITION WAS NOT MADE MERELY ON THE BASIS OF FINDINGS GIVEN APROPOS THE SECRET BANK ACCOUNTS, DISBURSEMENT MADE OUT OF SUCH ACCOUNTS O R ON THE STRENGTH OF HAVALA ENTRIES, BY WHICH THE BOGUS COMMISSION AND T RADING INCOME SAID TO HAVE BEEN REINTRODUCED IN THE BOOKS OF THE ASSES SEE. THESE ASPECTS ARE ONLY SECONDARY, SUBORDINATE AND WERE USED TO BU TTRESS THE MAIN MATTER CONNECTED WITH THE AMOUNT OF ADDITION. THE V IOLATION OR OTHERWISE OF ANY RULE OF NATURAL JUSTICE MUST BE A MATTER OF SUBSTANCE NOT OF MERE FORM. NATURAL JUSTICE SHOULD ALWAYS BE USED FOR THE FURTHERANCE OF THE CAUSE OF JUSTICE. THE PALLADIUM OF JUSTICE REQUIRES, THAT LAW SUITS BE NOT PROTRACTED, OTHERWISE TREAT O PPRESSION MIGHT BE DONE UNDER THE COLOUR AND PRETENCE OF LAW [ INTEREST REPUBLICA UT SIT FINIS LITUM ]. THESE LOAFTY PRINCIPLES WHICH ARE HARBINGER OF J USTICE CANNOT BE USED FOR DRAGGING THE JUSTICE IN THE LABYRINTH. WE HAVE ALREADY INDICATED THAT ADVERSE EVIDENCE AND MATERIAL, RELIED UPON IN THE ORDER, TO REACH THE FINALITY SHOULD BE DISCLOSED TO THE ASSESSEE. BUT T HIS RULE IS NOT APPLICABLE WHERE THE MATERIAL OR EVIDENCE USED IS O F COLLATERAL NATURE. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THERE WAS NO DENIAL OF THE PRINCIPLES OF NATURAL JUSTICE. 12.4. IN THE BACKDROP OF ABOVE LEGAL PROPOSITION NO W WE PROCEED TO EXAMINE THE FACTS OF THE PRESENT CASE. THE HEARING OF THIS APPEAL COMMENCED ON 28-10-2014 AND THEN CONTINUED ON 2910,2014, 30-1 0-2014, 11-11-2014, 12-11-2014. UPTO 12-11-2014, THE LD. SR. COUNSEL AR GUED THE APPEAL ON MERITS AND ALSO REFERRED TO THE ISSUES RELATING TO LEGALITY OF SURVEY. REVENUE BEGAN ITS REPLY FROM 12-11-2014 AND THEN CONTINUED ON 13-11-2014. THEREAFTER, THE APPEAL WAS REFIXED FOR HEARING ON 1 5-12-2014 ON WHICH DATE LD. SR. COUNSEL RAISED A PLEA REGARDING NO CROSS-EX AMINATION BEING PROVIDED TO EMPLOYEES, AS WILL BE EVIDENT FROM FOLLOWING ORD ER-SHEET NOTINGS. 57 ITA 3522/DEL/2013 15-12-2014:- PRESENT: FOR ASSESSEE: SHRI P.KAKA SR. ADV. ALONG WITH SHRI VIKASH SRIVASTAVA ADV. FOR DEPARTMENT: SHRI G. DAVE ADV. (SPL. COUNSEL ) ALONG WITH SHRI SANJEEV SHARMA CIT(DR). LD. SR. COUNSEL SUBMITS THAT ON THE FIRST DAY OF HE ARING HE HAD RAISED OBJECTION IN REGARD TO THE CERTIFICATE GIVEN IN RESPECT OF THE PAPER BOOK FILED BY THE DEPARTMENT, WHICH WAS NOT IN ACCO RDANCE WITH RULE 18 OF THE ITAT RULES. ON RESUMPTION OF HEARING, LD. SR. COUNSEL REFERRED TO THE CERTIFICATE FILED BY THE DEPARTMENT DATED 7-11-2014 AND POINTED OUT THAT AGAIN DEPARTMENT HAS NOT FILED THE CERTIFICATE IN ACCORDA NCE WITH THE ITAT RULES. LD. SR. COUNSEL FURTHER POINTED OUT THAT IN THE PA PER BOOK, FILED BY THE DEPARTMENT, THERE ARE CERTAIN STATEMENTS/ DOCUMENTS , WHICH HAVE NEITHER BEEN REFERRED TO IN THE ASSESSMENT ORDER NOR IN CIT (A)S ORDER AND, THUS, THEY ARE IN THE SHAPE OF ADDITIONAL EVIDENCE. LD. SPECIAL COUNSEL FOR THE DEPARTMENT VEHEMENTLY O PPOSED THESE SUBMISSIONS AND SUBMITTED THAT THE ENTIRE PROCEEDIN GS U/S 201/201(1A) HAVE BEEN INITIATED ON THE BASIS OF SURVEY CARRIED OUT BY THE DEPARTMENT. HE ALSO FILED A COPY OF SURVEY REPORT AS PER THE DI RECTION OF THE BENCH. HE FURTHER SUBMITTED THAT IN THE REVENUES PAPER BOOK (VOL. I), THE FOLLOWING DOCUMENTS HAVE BEEN REFERRED TO BY CFO IN HER STATE MENT AND, THEREFORE, IT CANNOT BE SAID THAT THEY ARE NOT RELEVANT: 1. R&D SUB-CONTRACTING AGREEMENT DATED 01-04-2001 2. R&D SUB-CONTRACTING AGREEMENT DATED 01-09-2003. 3. SERVICE AGREEMENT DATED 01-01-2006 4. SERVICE AGREEMENT DATED NOVEMBER, 2010 5. MINUTES OF MEETING OF THE BOARD OF DIRECTORS, SEPTE MBER 2005, SEPTEMBER 2007, DECEMBER 2007, MARCH 2008 AND 6. NOTE ON SPONSORSHIPS SERVICE AGREEMENT APRIL 2009. LD. SPL. COUNSEL FURTHER POINTED OUT THAT THERE IS NO OBJECTION TO THE DOCUMENTS CONTAINED AT SL. NOS. 8 & 10 WHICH ARE AS UNDER: 8. ALL THE E-MAILS OF MS. ARJA BJORKLUND WITH ANSSI FO UND AT THE TIME OF SURVEY AND EMAILS OF OTHER EMPLOYEES. 58 ITA 3522/DEL/2013 10. SOFTWARE DELIVERY & PROCEDURES WHICH IS PART OF THE AGREEMENT DATED IST JANUARY,2006. AS FAR AS OTHER THREE DOCUMENTS I.E. AT SL. 7, 9 & 11ARE CONCERNED, LD. SPECIAL COUNSEL STATED THAT THE SAME MAY BE IG NORED. LD. SR. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE BE PROVIDED CROSS-EXAMINATION OF THE EMPLOYEES, WHOSE STATEMENT S WERE RECORDED DURING THE COURSE OF SURVEY AND RELIED UPON BY AO. LD. SPECIAL COUNSEL SUBMITTED THAT SINCE THE STATEM ENTS ARE OF ASSESSEES EMPLOYEES ONLY, WHO WERE ASSOCIATED WITH THE ACTUAL OPERATIONS OF THE ASSESSEES BUSINESS, THEREFORE, NO CROSS-EXA MINATION NEEDS TO BE PROVIDED. LD. SENIOR COUNSEL, IN REPLY, SUBMITTED THAT THE E MPLOYEES WERE NOT KNOWING AS TO WHAT WERE THE SETTINGS IN SAP, HO W THE SOFTWARE PRODUCT WAS MANUFACTURED AND SEALED IN BINARY CODIN G, WHICH WAS NOT CAPABLE OF TEMPERING WITH AND OTHER ASPECTS. AFTER HEARING BOTH THE PARTIES, THE BENCH DIRECTED THE ASSESSEES REPRESENTATIVE TO FILE A DETAILED NOTE ON HIS PRELI MINARY OBJECTIONS, WITH A COPY TO LD. SPECIAL COUNSEL FOR REVENUE, SO THAT TH E ISSUES MAY BE CRYSTALLIZED. 10/2/15: THE ASSESSEE COUNSEL: SHRI P.KAKA SR. ADV . DEPTT. SH. G. DAVE ADV. (SPL. COUNSEL) THE LD. G. DAVE (SPL. COUNSEL) FILES THE REPLY OF THE REVENUE ON CONTENTIONS RAISED BY & ON BEHALF OF THE APPELLANT IN THEIR U NDATED LETTER FILED IN THE COURSE OF HEARING ON 17/12/14 ON THE ISSUE OF OPPOR TUNITY FOR CROSS EXAMINATION. THE LD. SR. COUNSEL FOR ASSESSEE REFERRED TO THE PE TITION FILED ON 30.1.15 IN THE OFFICE, A COPY OF WHICH WAS PROVIDED TO THE DEPARTM ENT ON 31/1/15, IN RESPONSE TO THE DIRECTION OF BENCH TO SPECIFY PARTI CULAR EMPLOYEES WHOM THE ASSESSEE WANT TO CROSS EXAMINE, LD. SPECIAL COUNSEL POINTED OUT THAT ASSESSEE HAS NOT SPECIFIED THE EMPLOYEES TO WHOM THEY WANT T O CROSS EXAMINE AND ADVANCED HIS ARGUMENTS ON THIS PRELIMINARY OBJECTIO N OF ASSESSEE. LD. SENIOR COUNSEL FOR ASSESSEE IS REPLYING FOR FUR THER HEARING. ADJOURNED TO 11/02/15. 12.5. AT THIS JUNCTURE, WE MAY POINT OUT THAT IN TH E WRITTEN SUBMISSIONS FILED BY REVENUE, THE DATES OF HEARINGS HAVE NOT BEEN COR RECTLY MENTIONED. IN VIEW 59 ITA 3522/DEL/2013 OF THE ABOVE PROCEEDINGS, THE REVENUES CONTENTION IS THAT THE TIME OF RAISING THIS PLEA, AT SUCH A LATE STAGE, RAISES SERIOUS DOU BT ON THE PURPOSE OF APPEAL BEING PURSUED BY THE ASSESSEE. THE IMPACT OF THIS S UBMISSION OF REVENUE WILL BE CONSIDERED WHILE ARRIVING AT FINAL CONCLUSION ON THIS ISSUE. 13. AS WE HAVE ALREADY DISCUSSED EARLIER THAT WHETH ER CROSS-EXAMINATION IS TO BE PROVIDED OR NOT DEPENDS UPON THE FACTS OF EACH CASE AND THERE IS NO THUMB RULE OR STRAIGHT TIGHT JACKET FORMULA FOR ARR IVING AT THIS CONCLUSION. WE HAVE CONSIDERED ALL THE CASE LAWS RELIED UPON BO TH THE SIDES TO ARRIVE AT OUR CONCLUSION. HOWEVER, WE ARE NOT DISCUSSING THE VARIOUS CASE LAWS BECAUSE IT ALL DEPENDS ON FACTS OF EACH CASE WHETHE R PRINCIPLES OF NATURAL JUSTICE HAVE BEEN COMPLIED WITH OR NOT. IF DECISION MAKING AUTHORITY HAS PROVIDED DUE OPPORTUNITY TO THE PERSON COMPLAINING OF NON-OBSERVANCE OF PRINCIPLES OF NATURAL JUSTICE THEN IT IS FOR THE PE RSON SO COMPLAINING TO DEMONSTRATE THE SAME AND SHOW THE PREJUDICE CAUSED TO HIM. MERE BALD ASSERTION OF NON-OBSERVANCE OF THE PRINCIPLES OF NA TURAL JUSTICE IS OF NO CONSEQUENCE. 13.1. IN COURSE OF SURVEY IT WAS FOUND THAT ASSESSE E HAD MADE PAYMENTS TO NOKIA CORPORATION FOR SOFTWARE REQUIRED TO BE INSTA LLED IN THE MOBILE HANDSETS DURING MANUFACTURING. IT WAS FOUND THAT TH E ACCOUNTS OF ASSESSEE WERE MAINTAINED IN THE SAP ERP SYSTEM. THE MAIN SER VER AND THE ADMINISTRATIVE RIGHTS OF THIS SYSTEM WERE LOCATED A T FINLAND. THE EMPLOYEES OF NIPL WERE GIVEN USER RIGHT OF NEED BASE. IN COUR SE OF SURVEY THE REPORTS WERE GENERATED FROM THE SYSTEM AT CHENNAI IN REGARD TO THE PAYMENTS MADE BY NIPL TO NOKIA CORPORATION. THESE REPORTS WERE CR OSS CHECKED AND VERIFIED BY THE EMPLOYEES OF NIPL IN COURSE OF SURV EY. THE INVOICES WERE ALSO IMPOUNDED WHICH WERE RAISED BY NOKIA CORPORATI ON OF SOFTWARE 60 ITA 3522/DEL/2013 PAYMENTS AT CHENNAI FACTORY. THESE INVOICES WERE RA ISED AT CHENNAI FACTORY. THE AO EXAMINED THE VARIOUS DETAILS WITH R ESPECT TO COMMERCIAL AGREEMENT SUBMITTED BY THE ASSESSEE. ALL THESE PREL IMINARY DETAILS LED TO THE AOS BELIEF THAT PAYMENTS WERE MADE FOR DOWN LOADS MADE BY NIPL UNDER THE AGREEMENT FOR USE IN MANUFACTURE OF MOBILE PHON ES. HE, THEREFORE, EXAMINED THE TP DOCUMENTATION SOFTWARE SUPPLY AGREE MENT DATED 1-1-2006 AND R&D SUB-CONTRACT AGREEMENT BETWEEN M/S NOKIA CO RPORATION FINLAND AND NIPL TO FIND OUT THE TRUE NATURE OF PAYMENT MAD E BY ASSESSEE TO M/S NOKIA CORPORATION. HE ALSO NOTICED ONE IMPORTANT AS PECT THAT HE INVOICES WERE PREPARED MANUALLY BY EMPLOYEES OF NIPL ON BEHA LF OF NOKIA CORPORATION OYZ. THE ASSESSEES CLAIM WAS THAT THE PAYMENTS MADE FOR SOFTWARE WAS ON ACCOUNT OF PURCHASE OF RAW-MATERIA L AND, THEREFORE, IT WAS NOT COVERED U/S 195 OF THE ACT, ATTRACTING TDS PROV ISIONS. 13.2. IN THE BACKDROP OF ABOVE FACTS NOW WE HAVE TO EXAMINE THE ROLE OF STATEMENTS RECORDED BY THE SURVEY AUTHORITIES IN AR RIVING AT AOS CONCLUSION PARTICULARLY IN THE BACKDROP OF ASSESSEES PLEA THA T ENTIRE ADDITION MADE BY AO IS BASED ON STATEMENTS. 13.3. THE AO AT PAGE 8 OF HIS ORDER HAS OBSERVED TH AT COPIES OF STATEMENTS RECORDED AT GURGAON WERE PROVIDED TO THE AR ON 12-2 -2013. COPIES OF STATEMENTS RECEIVED FROM CHENNAI WERE PROVIDED TO THE ASSESSEE ON 14-2- 2013. ON 20-2-2013, THE COPY OF REPORT OF DIRECTOR CFSL HYDERABAD WAS PROVIDED TO ASSESSEES REPRESENTATIVE. ON 25-2-2013 , THE AR OF ASSESSEE WAS PROVIDE WITH COPIES OF HARD DISC RECEIVED FROM CHEN NAI INVESTIGATION WING. 13.4. ON 26-2-2013 THE AO SERVED A SHOW CAUSE NOTIC E FOR AYS 2007-08, 2009-10, 1010-11 & 2011-12 INCORPORATING THEREIN EX TRACTS FROM STATEMENTS RECEIVED ON 19-2-2013 AND ALSO RELIED UPON CFSL REP ORT. 61 ITA 3522/DEL/2013 14. AT PAGE 38 OF HIS ORDER, THE AO HAS OBSERVED TH AT DURING THE COURSE OF SURVEY, THE EMPLOYEES OF NIPL WERE ASKED AS TO WHET HER THERE EXISTED ANY AGREEMENT BETWEEN NIPL AND NOKIA CORPORATION GOVERN ING THE TRANSFER OF SOFTWARE AND PAYMENTS THEREOF. HE HAS OBSERVED THAT NO SUCH AGREEMENT WAS FOUND AT THE SURVEY PREMISES EITHER AT THE CHENNAI FACTORY OR GURGAON CORPORATE OFFICE. NONE OF THE EXECUTIVES KNEW ABOUT THE EXISTENCE OF ANY SUCH AGREEMENTS. M/S ACHA BJORKLUND CFO NIPL TILL 2 1-12-2012 EXPRESSED HER IGNORANCE, THOUGH SPECIFICALLY ASKED ABOUT SUCH AGREEMENT ON THE DATE OF SURVEY. HOWEVER, DURING THE COURSE OF POST SURVEY I NQUIRY PROCEEDINGS, SHE PRODUCED A COPY OF THE SOFTWARE SUPPLY AGREEMENT DA TED 1-1-2006. THE AO OBSERVED THAT WHEN QUESTIONED ABOUT THE EXISTENCE A ND WHEREABOUTS OF THE ORIGINAL AGREEMENT WITH NIPL, SHE COULD NOT PROVIDE ANY CONVINCING REPLY. THEREFORE, THE STATEMENT OF CFO WAS RECORDED ON OAT H BY AO. THE AO HAS OBSERVED THAT VERACITY AND GENUINENESS OF THIS SOFT WARE SUPPLY AGREEMENT WAS DOUBTFUL. HOWEVER, AO ELABORATELY EXAMINED THE AGREEMENT AFTER IT WAS PRODUCED BEFORE HIM POST SURVEY. AT PRESENT WE ARE NOT GOING INTO THE DETAILS OF THIS SOFTWARE SUPPLY AGREEMENT AND ARE O NLY REFERRING TO THE SAME TO DEMONSTRATE THE BACKGROUND IN WHICH THE STATEMEN T OF MS. ACHA BJORKLUND CFO IS TO BE CONSIDERED. THEREFORE, AO S FINDINGS ARE PRIMARILY BASED ON AGREEMENT AND NOT ON CFOS STATEMENT WHICH WAS USED ONLY TO CORROBORATE HIS FINDINGS. 14.1. AS NOTED EARLIER, THE INVOICES RAISED BY NOKI A CORPORATION WERE IMPOUNDED DURING THE COURSE OF SURVEY ON 8-1-2013 A T NOKIA FACTORY CHENNAI. THE INVOICES WERE SUBMITTED BEFORE THE SEZ CUSTOMS AUTHORITIES ALONG WITH BILL OF ENTRY. THESE INVOICES SPECIFIED THE DETAILS FOR SOFTWARE 62 ITA 3522/DEL/2013 PAYMENTS MADE BY NIPL. THIS WAS ALSO USED BY AO TO ARRIVE AT HIS CONCLUSIONS. 14.2. AS NOTED EARLIER, THE MAIN ISSUE WAS TO FIND OUT THE NATURE OF TRANSACTION AND, THEREFORE, IT WAS NECESSARY TO FIN D OUT THE MANUFACTURING PROCESS AT THE FACTORY PREMISES. IN THIS REGARD AO RELIED UPON THE STATEMENTS OF TECHNICAL EXPERTS, THE EXTRACTS FROM WHICH ARE R EPRODUCED HEREUNDER TO DEMONSTRATE THAT THERE WAS NO CONTRADICTION BETWEEN STATEMENTS OF VARIOUS TOP RANKING TECHNICAL EXPERTS OF ASESSEE-COMPANY. 14.3. IN THIS REGARD THE FIRST STATEMENT OF FACTORY HEAD AND DIRECTOR OPERATION PRAKASH KATAMA WAS RECORDED. THIS STATEMENT IS CONT AINED AT PAGES 602 TO 604 OF THE PB. THE QUESTION NO. 1, 3,4,5,6,9 AND 10 ARE TO BE REPRODUCED. Q.L PLEASE FURNISH THE LIST OF TOP EMPLOYEES WORKIN G AT CHENNAI PLANT? ANS. TOP EMPLOYEES ARE MYSELF DIRECTOR (OPERATIONS) , SHRI.SUBBIAH C AND SHRI.RITCHIE RICE ARE HEADS OF PRODUCTION, SHRI.VISHAL MANKOTIA, HEAD OF LOGISTICS AND PLANNIN G/ SHRI.SEMBIAN V, HEAD OF PRODUCT AND PROCESS ENGINEERING, SHRI. SURESH MUPPALA, HEAD OF QUALITY FUNCTION, SHR LRAHUL SOOD, HEAD OF BUSINESS CONTROL, SHRT.INDRAQLRI, HEAD OF CORPOR ATE AFFAIRS, SHRI.D.SOUNDARARAJAN, HEAD OF HR. Q..3 PLEASE MENTION THE PERSON INVOLVED IN THE DECI SION MAKING AT AFFECTS THE DAY TO DAY AFFAIRS OF THE CHENNAI PL ANT. ANS. MYSELF IS INVOLVED IN THE DECISION MAKING IN THE AREAS OF EDUCATION, PLANNING/ PRODUCT AND PROCESS EQUIPMENT, MAN POWER PLANNING. SHRI D. SBUNDARARAJAN INVOLVES IN DECISION MAKING PROCESS I N RESPECT OF HR RELATED ISSUES. SHRLRAHUL SOOD INVOLVES IN COST MAN AGEMENT WORKS . Q. 4. WHETHER ANY EMPLOYMENT LETTER OR EMPLOYMENT A GREERNENT ARE ISSUED TO THE EMPLOYEES. IF YES, BY WHOM? ANS. EMPLOYMENT LETTER OR EMPLOYMENT AGREEMENT ARE ISSUED BY HR CENTRAL TEAM PLACED AT PERUNGUDI OFFICE. 63 ITA 3522/DEL/2013 Q.5 PLEASE FURNISH THE DETAILS OF PERSON(S) WHO DEC IDES THE PRICING AND SOURCE OF THE BILL OF MATERIAL (SOM) FOR HARDWARE C OMPONENTS AND SOFTWARE THAT ARE USED FOR MANUFACTURE / ASSEMBLY O F MOBILE PHONES AT CHENNAI PLANT. ANS. PRICING ON THE BOM FOR HARDWARE COMPONENTS AND SOFTWARE ARE DECIDED BY MOBILE PHONES R&D PROGRAMME, SOURCING AN D GLOBAL FINANCE. MR. DIRK IS THE HEAD OF R&D PROGRAMME WHO SITS IN B EIJING, MR.JARKKO SAKKI IS THE HEAD OF SOURCING, WHO SITS IN ESPRO, F INLAND. MR.KRISTIAN PULLOLA IS THE GLOBAL FINANCE ANTROLLER, WHO SITS I N ESPRO, FINLAND . Q. 6 IS THERE ANY AGREEMENT FOR SUPPLY OF SOFTWARE THAT IS USED BY THE CHENNAI PLANT, JF YES, PLEASE FURNISH THE SA ME. ANS. I HAVE NOT SEEN OR ACCESS ANY SUCH DOCUMENT FO R SUPPLY OF SOFTWRE.. Q.9 WHETHER THE SUBSIDIARY (NOKIA INDIA PRIVATE LIM ITED, CHENNAI PLANT) IS USED FOR THE ACTIVITIES OF THE PA RENT COMPANY NOKIA OYJ, FINLAND? ANS. THOUGH NOKIA INDIA PVT. LTD., IS WHOLLY OWNED SUBSIDY OF M/S. NOKIA OYJ, RNLAND, I AM NOT AWARE OF ANY ACTIVITIES BEING CARRIED OUT ON BEHALF OF M/S.NOKIA OYJ, FINLAND BY M/S.NOKIA INDIA PVT. LTD., CHENNAI. Q.10 WHETHER ANY DOCUMENT I PAPER PERTAINING TO NOK IA OYJ, FINLAND IS MAINTAINED AT NOKIA INDIA PRIVATE LIMITED, CHENNAI PLANT? ANS. I AM NOT AWARE OF ANY DOCUMENT PERTAINING TO M /S.NOKIA OYJ ARE MAINTAINED AT NOKIA INDIA PRIVATE LIMITED, CHENNAI. 14.3. ON 18-1-2013 CONTAINED AT PAGE 693-697 OF PB- AGAIN STATEMENT OF SHRI PRAKASH KATAMA HAS BEEN RECORDED ON OATH. 15.THE NEXT STATEMENT RELEVANT IN THE PRESENT CONTE XT IS OF MS. ARJA BJORKLUND IN COURSE OF SURVEY ON 8 & 9 AND SUBSEQUE NTLY ON 24-1-2013 AND 31-1-2013 . THE STATEMENT IS CONTAINED AT PAGES 565 TO 569 AND AT PAGES 605 TO 632 OF THE PB. RELEVANT QUESTIONS AND ANSWERS TH EREOF ARE REPRODUCED HEREUNDER: Q.1: PLEASE FURNISH DETAILS OF YOUR ASSOCIATION WI TH NOKIA GROUP OF COMPANIES. 64 ITA 3522/DEL/2013 ANS: I AM ASSOCIATED WITH NOKIA GROUP OF COMPANIES SINCE NOV. 20004. I WAS WORKING WITH NOKIA CORPORATION, FINLAN D FROM 2004 TO 2010, STATIONED AT FINLAND. FROM APRIL, 2010 TO APR IL, 2012, I WAS WORKING WITH NOKIA INDIA PVT. LTD. IN APRIL, 2012, I BECAME CFO OF NOKIA INDIA PVT. LTD. SINE 1 ST JANUARY, 2013, I M POSTED AS CFO OF NOKIA INDIA SALES PVT. LTD. Q.2: WHAT IS YOUR PRESENT ROLE IN THE AFFAIRS OF NO KIA INDIA PVT. LTD? ANS: IN NOKIA SALES INDIA PVT. LTD., PRESENTLY IM SUPPORTING THE WHOLE INDIA SUPPORT IN COMPLIANCE MATTERS WHEN NEED ED, FOR EXAMPLE IN TRAINING, COMPLIANCE ROLES ETC. TILL MA RCH, 2013, THE PERSON IN THE HELM OF AFFAIRS OF ACCOUNTING MATTERS OF NOKIA INDIA PVT. LTD. I.E. MR. TANUJ PATRO, WILL BE REPORTING T O ME. Q.5: PLEASE FURNISH A DETAILED DESCRIPTION OF MANUF ACTURING ACTIVITIES OF NOKIA INDIA PVT. LTD? ANS: NOKIA CHENNAI FACTORY WAS SET UP IN AROUND 200 6, IT WAS ESTABLISHED IN SEZ BECAUSE IT WAS SUPPOSED TO BE AN 100% EOU. IT WAS A UNIT OF NOKIA INDIA PVT. LTD. IT PURCHASES CO MPONENTS FROM VARIOUS SUPPLIERS, INITIAL THERE WERE NO INDIAN SUP PLIERS, BUT PRESENTLY, I UNDERSTAND, IT HAS BOTH INDIAN AND OTH ER OFFSHORE SUPPLIERS. THOSE COMPONENTS ARE ASSEMBLED IN CHENNA I FACTORY, THEN THEY ARE EXPORTED AND SOLD TO NOKIA CORPORATION AND THEN TO VARIOUS CUSTOMERS. Q.6: PLEASE STATE HOW THE MODELS TO MANUFACTURE ARE DECIDED? ANS: NOKIA CORPORATION DEVELOPS, DESIGN AND THROUGH THEIR R&D ALSO DEVELOPS SOFTWARE ETC. FOR DIFFERENT MODELS, F URNISH THOSE PARTICULARS TO NIPL AND ORDERS FOR MANUFACTURING O F DESIRED NUMBER OF PIECES OF A PARTICULAR MODEL. THIS IS DONE UNDER CONTRACT MANUFACTURING. Q.7: IS THE ABOVE CONTRACT IS THROUGH SOME WRITTEN INSTRUMENTS? ANS: YES, WE HAVE THAT. WELL PROVIDE THE SAME TO Y OU. Q.9: PLEASE STATE HOW THE PROCESS OF DEVELOPING AND SELECTION OF SOFTWARE TAKE PLACE FOR ANY PARTICULAR MODEL OF HAN DSET, THAT ARE MANUFACTURED IN CHENNAI FACTORY? ANS: I DO NOT KNOW WHERE THE SOFTWARE ARE DEVELOPED , BUT IT IS EMBEDDED IN THE HANDSET IN THE COURSE OF MANUFACTUR ING OF THE HANDSET. Q. 15: WE ARE GIVEN TO UNDERSTAND THAT EARLIER INV OICES RAISED BY NOKIA CORP. TO INDIAN COMPANY NIPL CONTAINED PRICE OF SOFTWARE, 65 ITA 3522/DEL/2013 HOWEVER, AFTERWARDS THIS PROCESS WAS DISCONTINUED. PLEASE STATE THE ENTIRE FACTS IN DETAILS. ANS: MY UNDERSTANDING IS THAT AT SOME POINT, DUE TO THE COST GETTING HIGH, NIPL COULD NOT GET THAT MOST COMPONEN TS ANY MORE, BUT I DO NOT HAVE ANY EVIDENCE IN THIS REGARD, BECA USE IT IS RELATED TO MANUFACTURING ACTIVITIES. PROBABLY THIS HAPPENED WH EN NOKIA GROUP STARTED MAKING LOSSES AND SYMBIAN WAS NO LONGER COS T COMPETITIVE. Q16: FROM WHEN THIS STARTED, WHO TOOK DECISIONS IN THIS REGRD, WHETHER THERE WAS ANY WRITTEN AGREEMENT FOR NOT CHA RGING ANY COST FOR DELIVERING SOFTWARE TO NIPL ANY MORE? ANS: IT STARTED SOMETIMES IN 2012. WHO TOOK DECISIO NS, I DONT KNOW. PEOPLE AT NOKIA CORP. MIGHT BE KNOWING IT. I HAVE NO KNOWLEDGE OF ANY SUCH AGREEMENTS. Q17: WHO IN NIPL MIGHT BE KNOWING ABOUT ANY SUCH AG REEMENT? WAS THERE ANY OTHER FORM OF UNDERSTANDING BETWEEN N OKIA CORP. AND NIPL? ANS: IT IS NOT IN MY KNOWLEDGE. Q.18: PLEASE STATE WHAT ARE THE AGREEMENTS THAT HAV E BEEN MADE BETWEEN NOKIA CORP. AND NIPL. PL. PRODUCE COPIES OF ALL SUCH AGREEMENTS. ANS: THERE ARE USUALLY FOUR AGREEMENTS, ONE SHOULD BE REGARDING 'CONTRACT MANUFACTURING AGREEMENT', SECOND SHOULD B E ON SALES AND DISTRIBUTION AGREEMENT, THIRD SHOULD BE ON R&D AND SERVICES AND FOURTH SHOULD, BE SERVICE AGREEMENTS. I SHALL PRODU CE COPIES OF THOSE AGREEMENTS WE HAVE IN PLACE IN INDIA. 15.1. NEXT STATEMENT OF JITENDRA GROVER RECORDED BY THE DDIT, CHENNAI U/S 131(1A) OF THE ACT ON 4-2-2013 AND 5-2-2013, IS CON TAINED AT PAGES 665 TO 680 OF THE PB. RELEVANT QUESTIONS AND ANSWERS THERE TO ARE REPRODUCED BELOW: Q.2: KINDLY TELL ME ABOUT YOURSELF? ANS: I AM CHARTERED ACCOUNTANT BY PROFESSION. I COM PLETED MY CA. IN JAN. 98. I FIRST WORKED WITH SIEMENS TELECOM FOR TWO YEARS, 66 ITA 3522/DEL/2013 THEN TWO YEARS WITH KPMG. IN 2003 I MOVED TO ARIBA INDIA PVT. LTD. IN 2005, I WAS WITH ERICSSON. IN MAY 2008, I JOINED NIPL AND WAS WITH NIPL UP TO 10TH SEPT., 2012. NOW I AM WORK ING WITH ARICENT TECHNOLOGIES, GURGAON. Q. 3: WHAT WERE YOUR ROLES AND RESPONSIBILITIES AS TAXATION HEAD IN M/S NIPL FROM 2008 TO 2012? ANS: I WAS TAX MANAGER FOR INDIA CORPORATE TAX AND WAS RESPONSIBLE FOR PLANNING, COMMENTING ON BUSINESS MO DEL CHANGE, TRANSFER PRICING ETC. FROM INDIA TAX PERSPECTIVE. TAX COMPLIANCE WAS PART OF THE RESPONSIBILITY OF SHARED ACCOUNTIN G SERVICES TEAM IN FINANCE. Q. 4: PLEASE EXPLAIN ABOUT THE POSITION OF WITHHOLD ING TAX ON THE SOFTWARE SUPPLIED BY M/S NOKIA OYJ SINCE THE F.Y. 2-006-07 TO THE DATE OF YOUR JOINING IN M/S NIPL. PLEASE EXPLAIN AB OUT THE CHANGE IF ANY ON THE WITHHOLDING TAX ISSUE ON THE SOFTWARE S UPPLIED SUBSEQUENT TO THE DATE OF YOUR JOINING IN M/S NIP L. Q.16. I AM SHOWING THE MAIL BY MRS. RINNE SARI TO M R. KAMBHAMPATI SHIVA. IT CLEARLY STATES THAT MR. JITEN DRA GROVER TRAINED MRS. BINDU IN THE FACTORY TO DO SOFTWARE IN VOICING WITH THE BASIS THAT EACH MOBILE PHONE HAS A UNIQUE SOFTWARE LICENSE AND FURTHER STATED THAT MR. JITENDRA'S INVOICING MODEL IS BEING IMPLEMENTED. IT ALSO MENTIONS ABOUT THE PAYMENTS TO BE MADE FOR THE PURPOSE OF AVAILING IPR TO NOKIA GLOBAL. HENCE PLEA SE EXPLAIN HOW THE SOFTWARE INVOICING WAS MADE AS PER YOUR INSTRUC TION TO MRS. BINDU? ALSO EXPLAIN WHY THE BASIS OF UNIQUE SORTWAR E LICENSE SHOULD NOT BE CONSIDERED AS A MERE DOCUMENTARY PROO F CREATED FOR THE PURPOSE OF CIRCUMVENTING TAX LIABILITY? ANS: AS EXPLAINED ABOVE THE SOFTWARE INVOICING WAS DONE BY NOKIA CORP. FINLAND BASED ON THE INFORMATION THEY R ECEIVED FROM FACTORY FINANCE TEAM IN INDIA. I EMPHASIZE THAT THE RE WAS NO CHANGE IN THE METHODOLOGY FOR WORKING OUT SOFTWARE PRICE S INCE INCEPTION IN 2006 TILL 2011. THERE WAS NO NEW PROCESS FOR COMPUT ING SOFTWARE PRICE SUGGESTED OR IMPLEMENTED BY ME. THE INSTRUCTI ON MRS. SARI IS REFERRING TO IN HER EMAIL IS PROBABLY THE CHANGE I N THE DESCRIPTION OF INVOICE WHICH WAS EFFECTED AFTER THE PROCESS OF SUP PLY OF SOFTWARE KEY CAME INTO VOGUE. THE ONLY CHANGE THAT HAPPENED IN THE SOFTWARE DELIVERY PROCESS FROM MID OF 2009 WAS SUPPLY OF SOF TWARE KEYS ALONG WITH THE SOFTWARE. PROBABLY MRS. SARI IS REFE RRING THIS CHANGE 67 ITA 3522/DEL/2013 WHEN SHE MENTIONS USER LICENSE KEY. ABOUT THE COMME NT ON IPR IN MY UNDERSTANDING, THE RIGHTS AND OBLIGATIONS SHOULD BE SEEN IN THE CONTRACTUAL RELATIONSHIP BETWEEN M/S NIPL AND NOKIA CORP. Q.17. WHICH YOU MEANT TO SAY SOFTWARE PRICE IS A BA LANCING FIGURE IN ORDER TO ARRIVE THE REQUIRED MARGIN OF PROFIT AS PE R THE GLOBAL TRANSFER PRICING POLICY OF NOKIA OYJ? ANS. THE SOFTWARE IN DISCUSSION IS NOKIA PROPRIETAR Y SOFTWARE. SO WHAT I WAS INFORMED IS THAT THERE IS NO WAY TO APPR OPRIATELY VALUE A 'PROPRIETARY SOFTWARE' AS THERE ARE NO VALUATION ME THODS OR BENCH MARKS. IN SUCH A SCENARIO, SINCE 2006 THE METHOD FO LLOWED WAS TO VALUE EVERY ITEM AROUND EXCLUDING THE SOFTWARE AND IN ACCORDANCE WITH GLOBAL TRANSFER PRICING POLICY, NOKIA GAVE COS T PLUS MARGIN TO INDIA FACTORY. THE BALANCE PART OF COST WAS BILLED IN THE FORM OF SOFTWARE. SOFTWARE PRICING THEREFORE IS BASED ON VA RIABLE COSTING AND INDIA MANUFACTURING WAS FUNCTIONING AS LOW ENTITY. THE ANSWER TO THE QUESTION ABOVE IS YES. Q.18. PLEASE EXPLAIN WHETHER THERE WAS ANY AGREEMEN T FOR THE PURPOSE OF LIMITED RISK CONTRACT MANUFACTURING BY M /S NIPL WITH NOKIA OYJ? ANS. THE RISK PROFILE OF NOKIA INDIA MANUFACTURING CAN BE UNDERSTOOD ON THE GLOBAL TRANSFER PRICING POLICY. I T IS CLEARLY STATED IN THE POLICY THAT MANUFACTURING FUNCTIONS WILL BE COMPENSATED ON COST PLUS BASIS AND ALL THE RISKS IN BUSINESS ARE B EING ASSUMED BY NOKIA CORPORATION. TO THE BEST OF MY UNDERSTANDING AND MEMORY, I HAVE NOT SEEN ANY CONTRACT BETWEEN NOKIA CORP. AND NIPL FOR CONTRACT MANUFACTURING. Q. 23. WHAT IS THE ROLE OF F&C IN NIPL? ANS: NIPL F&C IS RESPONSIBLE FOR THREE PRIMARY FUNC TIONS. 1) SALES CONTROLLERSHIP INCLUDING PRICING OF PRODUCTS IN IND IA, 2) INVESTMENT CONTROLLER, 3) ARC (ACCOUNTING, REPORTING AND COMPL IANCE). F&C TEAM IN NIPL IS RESPONSIBLE FOR PROVIDING SUPPORT TO BUSINE SS IN TERMS OF PRICING, FINANCIAL ANALYSIS, FORECAST, BUDGETS, FUNDING, ETC . IN ADDITION, F&CS ROLE IS ALSO TO ENSURE ALL TAX COMPLIANCES AND REPORTING RE QUIREMENTS (INTERNAL & EXTERNAL REPORTING). THIS WOULD ALSO INCLUDE STATUT ORY AND TAX AUDITS. 68 ITA 3522/DEL/2013 15.2. NEXT STATEMENT OF E. UMA SHANKAR RECORDED BY THE DDIT, CHENNAI U/S 131 OF THE ACT ON 7-2-2013, IS CONTAINED AT PAG ES 660 TO 664 OF THE PB. RELEVANT QUESTIONS AND ANSWERS THERETO ARE REPRODUC ED BELOW: 2. PLEASE IDENTIFY YOURSELF ANS: I AM E. UMA SHANKAR, S/O SHRI N. ELUMALAI, AG ED 34 RESIDING AT NO. 45, HOUSING BOARD, NEAR COLLECTOR OFFICE, PA LLAVA NAGAR, KANCHIPURAM. I AM THE VARIANT MANAGER OF CHENNAI PL ANT OF M/S NOKIA INDIA PRIVATE LIMITED WORKING SINCE DECEMBER 2008. 3. AS VARIANT MANAGER, CHENNAI PLANT OF M/S NOKIA I NDIA PRIVATE LIMITED (NIPL), WHAT ARE THE VARIOUS ACTIV ITIES THAT YOU LOOK AFTER? ANS: I AM MANAGING THE ENGINEERING CHANGE MANAGEMEN T IN THE FACTORY. WHENEVER THERE IS ANY CHANGE IN EITHER TH E SOFTWARE OR THE HARDWARE ASPECTS OF A MODEL OF THE HANDSET BEING M ANUFACTURED IN THE FACTORY, IT IS EXECUTED THROUGH OUR DEPARTMENT NAMELY, THE ENGINEERING CHANGE MANAGEMENT DEPARTMENT, WHICH I AM HEADING. THE CHANGE IS INITIALLY COMMUNICATED TO ME THROUGH AN INTRANET COMMUNICATION CALLED AS PDM (PRODUCT DATA MANAGEMEN T SYSTEM). THIS IN FACT COMES AS AN ECN NUMBER (ENGINEERING CH ANGE NOTE). ONCE, I SEE THAT I UPDATE THE EXISTING PROCESS AS PER THE REQUIRED. 4. PLEASE EXPLAIN THE PROCESS THROUGH WHICH YOU UPD ATE THE SOFTWARE IN THE EXISTING MODELS OR IN NEW MODELS. ANS: AS I TOLD EARLIER, ANY CHANGE IN THE EXISTIN G MODEL OR THE INTRODUCTION OF NEW MODEL IS COMMUNICATED TO ME THR OUGH PDM VIA ECN. AS FAR AS SOFTWARE IS CONCERNED, IT IS DIRECTL Y DOWNLOADED INTO THE LOCAL IMES SERVER LOCATED IN THE CHENNAI FACTOR Y. I ALONG WITH MY TEAM ACCESS IT AND CHECK IT FOR THE PRESENCE OF ANY FUNCTIONAL IRREGULARITIES/DEFECTS. IN CASE, THERE ARE ANY, WE GET THEM RECTIFIED BY THE GLOBAL R&D TEAM BY HIGHLIGHTING THE SAME. IN A' , MY ROLE AS FAR AS SOFTWARE IS CONCERNED TO MAKE IT READY TO BE USE D IN THE CHENNAI FACTORY PRODUCTION. ONCE THIS IS OVER, THE SOFTWARE IS READY FOR FLASHING INTO THE HANDSETS BY THE PRODUCTION TEAM. 5. PLEASE EXPLAIN THE MANUFACTURING/ASSEMBLING PROC ESS OF THE MOBILE PHONES MANUFACTURED IN THE CHENNAI PLANT OF M/S NOKIA INDIA PRIVATE LIMITED (NIPL)? 69 ITA 3522/DEL/2013 ANS: THE MANUFACTURING PROCESS CONSISTS OF THE FOLL OWING STEPS, 1. FIRST OF ALL, THE PRINTED CIRCUIT BOARDS ARE IMP ORTED FROM CHINA/TAIWAN. 2. THESE ARE LOADED TO MAGAZINE, THAT IS, SCREEN IM PRESSION FOR SOLDERING PURPOSES. 3. THEN IT WILL GO THROUGH THE PROCESS OF SMT (SURF ACE MOUNT TECHNOLOGY) WHEREIN, THE CAPACITORS, ICS, RESISTORS , SHIELD, LIGHT PROTECTIVE CAPS ETC ARE PLACED. 4. AFTER THIS PROCESS, THE COMPONENT IS PLACED AT A UTOMATED 'OPTIC INSPECTION FOR POSITION AND QUALITY TESTING. 5. AFTER THIS PROCESS, THEY SAME WILL BE PASSED TH ROUGH FINAL HEAT SHIELD CONNECTION AND PROTECTIVE CAP THROUGH REFLOW OVEN/HEATER. 6. AFTER ABOVE PROCESS IS OVER, ON THE SAID COMPON ENT, THE DOME SHEET IS PLACED 7. NEXT, ACF-(ASSEMBLING THE LCD TO THE BOARD) IS D ONE. UP TO THIS, THE PROCESS IS CALLED AS MODULE. AFTER THE MODULE, IN THE PROCESS OF PANEL FLASH, THE CORE SOFTWARE IS DOWNLOADED FROM T HE SERVER, LOCATED IN THE FACTORY, TO THE CHIP. THIS PANEL FLA SH IS THE HEART OF THE MOBILE PHONE. THE PRODUCT SERIAL NUMBER .(PSN) IS ASSIGNED DURING THE PANEL FLASH. 8. SUBSEQUENTLY, LIGHT GUIDE, PROTECTIVE SHIELD, D- COVER, CONNECTOR, MIC, SPEAKER ARE PLACED. 9. THEN, FINAL USER INTERFACE TESTS ARE CARRIED OU T. AT THIS STAGE, THE SEMI FINISHED PRODUCT IS CALLED AS THE ENGINE. 10. NOW THIS ENGINE IS FLASHED WITH LABEL SOFTWARE, WHERE THE CUSTOMER SETTINGS ARE LOADED IN THE MOBILE PHONE. 11. THE FINAL ASSEMBLY TOOL MECHANICS, WHICH IS KE Y MAT, A-COVER AND B-COVER, ARE PLACED. 6. WHAT ARE THE SOFTWARE THAT ARE USED IN THE MANUF ACTURING OF THE MOBILE PHONES THAT ARE MADE OUT OF CHENNAI AND AT WHAT STAGES, THE SOFTWARE ARE USED? ANS: THE MOBILE PHONES THAT ARE MANUFACTURED OUT OF THE CHENNAI PLANT ARE BASED ON SERIES-30 AND SERIES-40 PLATFORM S. FOR ANY MOBILE PHONE THAT IS LAUNCHED, THE SOFTWARE IS DES IGNED AND 70 ITA 3522/DEL/2013 DEVELOPED BY NOKIA R&D. THIS SOFTWARE IS STORED IN THE GLOBAL SERVER IN FINLAND. WHEN A NEW MODEL OF MOBILE PHONE IS LAUNCHED IN THE CHENNAI FACTORY, THE BASIC SOFTWARE IS DOWNLOAD ED FROM THE GLOBAL SERVER AND STORED IN THE LOCAL SERVER IN THE CHENNAI FACTORY. EACH TIME A MOBILE PHONE IS BEING MANUFACTURED; THE SOFTWARE IS FLASHED AND TESTED IN THE HANDSET AT FOUR DIFFERENT STAGES DURING THE MANUFACTURING PROCESS, PULLING THE SOFTWARE FROM TH E LOCAL SERVER LOCATED IN THE CHENNAI FACTORY. 1. THE FIRST PHASE OF SOFTWARE IS THE PANEL FLASH, WHE RE THE CORE SOFTWARE IS DOWNLOADED FROM THE LOCAL SERVER LOCATE D IN THE FACTORY INTO THE CHIP. THE PRODUCT SERIAL NUMBER IS GENERAT ED AT THIS STAGE. 2. THE SECOND STAGE IS THE ALIGNMENT TESTING STAGE WHE RE THE SOFTWARE ALIGNS THE RADIO FREQUENCY OF THE MOBILE HANDSETS. 3. THE THIRD PHASE IS CALLED AS THE FINAL USER INTERFA CE WHEREIN, THE SOFTWARE CHECKS THE FUNCTIONALITY OF THE MOBILE HAN DSETS. 4. THE FOURTH AND FINAL PHASE IS CALLED THE LABELING O F THE MOBILE HANDSETS, WHEREIN, THE CUSTOMER SETTINGS ARE DOWNL OADED IN THE MOBILE HANDSETS AND THE IMEI NUMBER IS ALSO GENER ATED. 7. PLEASE EXPLAIN, WHERE FROM THESE SOFTWARES, WHIC H ARE USED IN, THE MOBILE HANDSETS ARE OBTAINED AND HOW ARE THEY STORE D AND FINALLY INTO THE MOBILE HANDSETS? AND ALSO, EXPLAIN HOW ARE THEY PAID FOR? ANS: THESE SOFTWARE ARE DESIGNED AND DEVELOPED AT V ARIOUS R& D SITES OF NOKIA CORPORATION. THEN, THESE SOFTWARES A RE STORED AT THE GLOBAL SERVER OF NOKIA CORPORATION LOCATED IN FINL AND. AS EXPLAINED EARLIER, FOR EACH MODEL, THE SOFTWARE IS DOWNLOADED FROM THE GLOBAL SERVER TO THE LOCAL SERVER LOCATED IN THE CHENNAI F ACTORY AND STORED THEREIN. IN TURN, EACH TIME A MOBILE HANDSET IS BE ING MANUFACTURED; THE SOFTWARE IS BEING INCORPORATED INTO EACH MOBILE HANDSET. WITH REGARD TO THE PAYMENT FOR THE SOFTWARE, I DON'T KNO W THE BASIS, QUANTUM AND NATURE OF THESE PAYMENTS. 15.3. NEXT STATEMENT OF V. SEMBIAN RECORDED BY THE DDIT, CHENNAI U/S 131 ON 7-2-2013, IS CONTAINED AT PAGES 702-708 OF THE P B. RELEVANT QUESTIONS AND ANSWERS THERETO ARE REPRODUCED BELOW: 2. PLEASE IDENTIFY YOURSELF 71 ITA 3522/DEL/2013 ANS: I AM V. SEMBIAN 5/0. M. VENKATESAN RESIDING AT CF1, CASA XS APARTRNENT, MANAPAKKAM ROAD, MANAPAKKAM. I AM THE P RODUCT AND PROCESS ENGINEERING MANAGER OF CHENNAI PLANT OF M/S NOKIA INDIA PRIVATE LIMITED. I AM WORKING IN NIPL SINCE-AUGUST 2005 . 3. PRODUCT AND PROCESS ENGINEERING MANAGER, CHENNAI PLANT OF M/S NOKIA INDIA PRIVATE LIMITED (NIPL), WHAT ARE THE VA RIOUS ACTIVITIES THAT YOU LOOK AFTER? ANS: MY ROLE IS ENSURING THE OVERALL ENGINEERING CA PABILITY OF THE FACTORY WHICH INVOLVES NEW PRODUCT LAUNCH SUPPORT, MAINTENANCE ENGINEERING, INDUSTRIAL ENGINEERING SUPPORT AND. EQ UIPMENT INSTALLATION. 4. PLEASE EXPLAIN THE MANUFACTURING/ASSEMBLING PROC ESS OF THE MOBILE PHONES MANUFACTURED IN THE CHENNAI PLANT OF M/S NOKIA INDIA PRIVATE LIMITED (NIPL)? ANS: THE MANUFACTURING PROCESS CONSISTS OF THE FOL LOWING STEPS, 1. FIRST OF ALL, THE PRINTED CIRCUIT BOARDS ARE IMP ORTED FROM CHINA/TAIWAN. 2. THESE ARE LOADED TO MAGAZINE, THAT IS, SCREEN IM PRESSION FOR SOLDERING PURPOSES. 3. THEN IT WILL GO THROUGH THE PROCESS OF SMT (SURF ACE MOUNT TECHNOLOGY) WHEREIN, THE CAPACITORS, ICS, RESISTORS , SHIELD, LIGHT PROTECTIVE CAPS ETC ARE PLACED. 4. AFTER THIS PROCESS, THE COMPONENT IS PLACED AT A UTOMATED 'OPTIC INSPECTION FOR POSITION AND QUALITY TESTING. 5. AFTER THIS PROCESS, THEY SAME WILL BE PASSED TH ROUGH FINAL HEAT SHIELD CONNECTION AND PROTECTIVE CAP THROUGH REFLOW OVEN/HEATER. 6. AFTER ABOVE PROCESS IS OVER, ON THE SAID COMPON ENT, THE DOME SHEET IS PLACED 7. NEXT, ACF-(ASSEMBLING THE LCD TO THE BOARD) IS D ONE. UP TO THIS, THE PROCESS IS CALLED AS MODULE. AFTER THE MODULE, IN THE PROCESS OF PANEL FLASH, THE CORE SOFTWARE IS DOWNLOADED FROM T HE SERVER, LOCATED IN THE FACTORY, TO THE CHIP. THIS PANEL FLA SH IS THE HEART OF THE MOBILE PHONE. THE PRODUCT SERIAL NUMBER .(PSN) IS ASSIGNED DURING THE PANEL FLASH. 72 ITA 3522/DEL/2013 8. SUBSEQUENTLY, LIGHT GUIDE, PROTECTIVE SHIELD, D- COVER, CONNECTOR, MIC, SPEAKER ARE PLACED. 9. THEN, FINAL USER INTERFACE TESTS ARE CARRIED OU T. AT THIS STAGE, THE SEMI FINISHED PRODUCT IS CALLED AS THE ENGINE. 10. NOW THIS ENGINE IS FLASHED WITH LABEL SOFTWARE, WHERE THE CUSTOMER SETTINGS ARE LOADED IN THE MOBILE PHONE. 11. THE FINAL ASSEMBLY TOOL MECHANICS, WHICH IS KE Y MAT, A-COVER AND B-COVER, ARE PLACED. 5. WHAT ARE THE SOFTWARE THAT ARE USED IN THE MANUF ACTURING OF THE MOBILE PHONES THAT ARE MADE OUT OF CHENNAI AND AT WHAT STAGES, THE SOFTWARE ARE USED? ANS: THE MOBILE PHONES THAT ARE MANUFACTURED OUT OF THE CHENNAI PLANT ARE BASED ON SERIES-30 AND SERIES-40 PLATFORM S. FOR ANY MOBILE PHONE THAT IS LAUNCHED, THE SOFTWARE IS DES IGNED AND DEVELOPED BY NOKIA R&D. THIS SOFTWARE IS STORED IN THE GLOBAL SERVER IN FINLAND. WHEN A NEW MODEL OF MOBILE PHONE IS LAUNCHED IN THE CHENNAI FACTORY, THE BASIC SOFTWARE IS DOWNLOAD ED FROM THE GLOBAL SERVER AND STORED IN THE LOCAL SERVER IN THE CHENNAI FACTORY. EACH TIME A MOBILE PHONE IS BEING MANUFACTURED; THE SOFTWARE IS FLASHED AND TESTED IN THE HANDSET AT FOUR DIFFERENT STAGES DURING THE MANUFACTURING PROCESS, PULLING THE SOFTWARE FROM TH E LOCAL SERVER LOCATED IN THE CHENNAI FACTORY. 1. THE FIRST PHASE OF SOFTWARE IS THE PANEL FLASH, WHE RE THE CORE SOFTWARE IS DOWNLOADED FROM THE LOCAL SERVER LOCATE D IN THE FACTORY INTO THE CHIP. THE PRODUCT SERIAL NUMBER IS GENERAT ED AT THIS STAGE. 2. THE SECOND STAGE IS THE ALIGNMENT TESTING STAGE WHE RE THE SOFTWARE ALIGNS THE RADIO FREQUENCY OF THE MOBILE HANDSETS. 3. THE THIRD PHASE IS CALLED AS THE FINAL USER INTERFA CE WHEREIN, THE SOFTWARE CHECKS THE FUNCTIONALITY OF THE MOBILE HAN DSETS. 4. THE FOURTH AND FINAL PHASE IS CALLED THE LABELING O F THE MOBILE HANDSETS, WHEREIN, THE CUSTOMER SETTINGS ARE DOWNL OADED IN THE MOBILE HANDSETS AND THE IMEI NUMBER IS ALSO GENER ATED. 6. PLEASE EXPLAIN, WHERE FROM THESE SOFTWARES, WHIC H ARE USED IN, THE MOBILE HANDSETS ARE OBTAINED AND HOW ARE THEY STORE D AND FINALLY INTO THE MOBILE HANDSETS? AND ALSO, EXPLAIN HOW ARE THEY PAID FOR? ANS: THESE SOFTWARE ARE DESIGNED AND DEVELOPED AT V ARIOUS R& D SITES OF NOKIA CORPORATION. THEN, THESE SOFTWARES A RE STORED AT THE 73 ITA 3522/DEL/2013 GLOBAL SERVER OF NOKIA CORPORATION LOCATED IN FINL AND. AS EXPLAINED EARLIER, FOR EACH MODEL, THE SOFTWARE IS DOWNLOADED FROM THE GLOBAL SERVER TO THE LOCAL SERVER LOCATED IN THE CHENNAI F ACTORY AND STORED THEREIN. IN TURN, EACH TIME A MOBILE HANDSET IS BE ING MANUFACTURED; THE SOFTWARE IS BEING INCORPORATED INTO EACH MOBILE HANDSET. WITH REGARD TO THE PAYMENT FOR THE SOFTWARE, I DON'T KNO W THE BASIS, QUANTUM AND NATURE OF THESE PAYMENTS. 7. ARE YOU AWARE OF ANY SOFTWARE KEY NUMBERS BEING SUPPLIED BY NOKIA RATION AND ARE BEING USED IN THE MANUFACTU RING PROCESS? ANS: I DO NOT KNOW ANY SOFTWARE KEYS SUPPLIED BY NO KIA 15.4. NEXT STATEMENT OF NIKHIL GOPALKRISHNAN RECORD ED BY THE DDIT, CHENNAI U/S 131 OF THE ACT ON 18-1-2013, IS CONTAIN ED AT PAGES 688 TO 692 OF THE PB. RELEVANT QUESTIONS AND ANSWERS THERETO ARE REPRODUCED BELOW: 2. PLEASE IDENTIFY YOURSELF ANS: I AM NIKHIL GOPA/AKRISHNAN, S/O SHRI T, GOPALA KRISHNAN, AGED 33 RESIDING AT NO.10, SECOND FLOOR, NEW BETHANIA NA GAR, VALASARAVAKKAM, CHENNAI. I AM THE PRODUCT MANAGER O F CHENNAI PLANT OF M/S NOKIA INDIA PRIVATE LIMITED. I AM WORK ING SINCE NOVEMBER 2007. 3. AS PRODUCT MANAGER, CHENNAI PLANT OF MIS_NOKIA I NDIA PRIVATE LIMITED NIPL), WHAT ARE THE VARIOUS ACTIVITIES THAT YOU LOOK AFTER? ANS: I AM RESPONSIBLE FOR THE NEW PRODUCT LAUNCHES, VARIANT MANAGEMENT AND PROCESS ENGINEERING . 4. PLEASE EXPLAIN THE PROCESS THROUGH WHICH YOU UP DATE THE SOFTWARE IN THE EXISTING MODELS OR IN NEW MODELS. ANS: ANY CHANGE IN THE EXISTING MODEL OR THE INTROD UCTION OF NEW MODEL IS COMMUNICATED TO MY TEAM THROUGH POM VIA EC N. AS FAR AS SOFTWARE IS CONCERNED, IT IS DIRECTLY DOWNLOADED INTO THE LOCAL IMES SERVER LOCATED IN THE CHENNAI FACTORY. MY TEAM ACCESSES IT AND CHECKS IT FOR THE PRESENCE OF ANY FUNCTIONAL IR REGULARITIES/DEFECTS. IN CASE, THERE ARE ANY, WE GET THEM RECTIFIED BY TH E GLOBAL R&D TEAM BY HIGHLIGHTING THE SAME. IN ALL, MY TEAM ROLE AS F AR AS SOFTWARE IS 74 ITA 3522/DEL/2013 CONCERNED TO MAKE IT READY TO BE USED IN THE CHENNA I FACTORY PRODUCTION. ONCE THIS IS OVER, THE SOFTWARE IS READ Y FOR FLASHING INTO THE HANDSETS BY THE PRODUCTION TEAM. PLEASE EXPLAIN THE MANUFACTURING/ASSEMBLING PROCESS OF THE MOBILE PHONES MANUFACTURED IN THE CHENNAI PLANT OF M/S NOK IA INDIA PRIVATE LIMITED (NIPL)? ANS: THE MANUFACTURING PROCESS CONSISTS OF THE FOL LOWING STEPS, 1. FIRST OF ALL, THE PRINTED CIRCUIT BOARDS ARE IMP ORTED FROM CHINA/TAIWAN. 2. THESE ARE LOADED TO MAGAZINE, THAT IS, SCREEN IM PRESSION FOR SOLDERING PURPOSES. 3. THEN IT WILL GO THROUGH THE PROCESS OF SMT (SURF ACE MOUNT TECHNOLOGY) WHEREIN, THE CAPACITORS, ICS, RESISTORS , SHIELD, LIGHT PROTECTIVE CAPS ETC ARE PLACED. 4. AFTER THIS PROCESS, THE COMPONENT IS PLACED AT A UTOMATED 'OPTIC INSPECTION FOR POSITION AND QUALITY TESTING. 5. AFTER THIS PROCESS, THEY SAME WILL BE PASSED TH ROUGH FINAL HEAT SHIELD CONNECTION AND PROTECTIVE CAP THROUGH REFLOW OVEN/HEATER. 6. AFTER ABOVE PROCESS IS OVER, ON THE SAID COMPON ENT, THE DOME SHEET IS PLACED 7. NEXT, ACF-(ASSEMBLING THE LCD TO THE BOARD) IS D ONE. UP TO THIS, THE PROCESS IS CALLED AS MODULE. AFTER THE MODULE, IN THE PROCESS OF PANEL FLASH, THE CORE SOFTWARE IS DOWNLOADED FROM T HE SERVER, LOCATED IN THE FACTORY, TO THE CHIP. THIS PANEL FLA SH IS THE HEART OF THE MOBILE PHONE. THE PRODUCT SERIAL NUMBER .(PSN) IS ASSIGNED DURING THE PANEL FLASH. 8. SUBSEQUENTLY, LIGHT GUIDE, PROTECTIVE SHIELD, D- COVER, CONNECTOR, MIC, SPEAKER ARE PLACED. 9. THEN, FINAL USER INTERFACE TESTS ARE CARRIED OU T. AT THIS STAGE, THE SEMI FINISHED PRODUCT IS CALLED AS THE ENGINE. 10. NOW THIS ENGINE IS FLASHED WITH LABEL SOFTWARE, WHERE THE CUSTOMER SETTINGS ARE LOADED IN THE MOBILE PHONE. 75 ITA 3522/DEL/2013 11. THE FINAL ASSEMBLY TOOL MECHANICS, WHICH IS KE Y MAT, A-COVER AND B-COVER, ARE PLACED. 6. WHAT ARE THE SOFTWARE THAT ARE USED IN THE MANUF ACTURING OF THE MOBILE PHONES THAT ARE MADE OUT OF CHENNAI AND AT WHAT STAGES, THE SOFTWARE ARE USED? ANS: THE MOBILE PHONES THAT ARE MANUFACTURED OUT OF THE CHENNAI PLANT ARE BASED ON SERIES-30 AND SERIES-40 PLATFORM S. FOR ANY MOBILE PHONE THAT IS LAUNCHED, THE SOFTWARE IS DES IGNED AND DEVELOPED BY NOKIA R&D. THIS SOFTWARE IS STORED IN THE GLOBAL SERVER IN FINLAND. WHEN A NEW MODEL OF MOBILE PHONE IS LAUNCHED IN THE CHENNAI FACTORY, THE BASIC SOFTWARE IS DOWNLOAD ED FROM THE GLOBAL SERVER AND STORED IN THE LOCAL SERVER IN THE CHENNAI FACTORY. EACH TIME A MOBILE PHONE IS BEING MANUFACTURED; THE SOFTWARE IS FLASHED AND TESTED IN THE HANDSET AT FOUR DIFFERENT STAGES DURING THE MANUFACTURING PROCESS, PULLING THE SOFTWARE FROM TH E LOCAL SERVER LOCATED IN THE CHENNAI FACTORY. 1. THE FIRST PHASE OF SOFTWARE IS THE PANEL FLASH, WHE RE THE CORE SOFTWARE IS DOWNLOADED FROM THE LOCAL SERVER LOCATE D IN THE FACTORY INTO THE CHIP. THE PRODUCT SERIAL NUMBER IS GENERAT ED AT THIS STAGE. 2. THE SECOND STAGE IS THE ALIGNMENT TESTING STAGE WHE RE THE SOFTWARE ALIGNS THE RADIO FREQUENCY OF THE MOBILE HANDSETS. 3. THE THIRD PHASE IS CALLED AS THE FINAL USER INTERFA CE WHEREIN, THE SOFTWARE CHECKS THE FUNCTIONALITY OF THE MOBILE HAN DSETS. 4. THE FOURTH AND FINAL PHASE IS CALLED THE LABELING O F THE MOBILE HANDSETS, WHEREIN, THE CUSTOMER SETTINGS ARE DOWNL OADED IN THE MOBILE HANDSETS AND THE IMEI NUMBER IS ALSO GENER ATED. 7. PLEASE EXPLAIN, WHERE FROM THESE SOFTWARES, WHIC H ARE USED IN, THE MOBILE HANDSETS ARE OBTAINED AND HOW ARE THEY STORE D AND FINALLY INTO THE MOBILE HANDSETS? AND ALSO, EXPLAIN HOW ARE THEY PAID FOR? ANS: THESE SOFTWARE ARE DESIGNED AND DEVELOPED AT V ARIOUS R& D SITES OF NOKIA CORPORATION. THEN, THESE SOFTWARES A RE STORED AT THE GLOBAL SERVER OF NOKIA CORPORATION LOCATED IN FINL AND. AS EXPLAINED EARLIER, FOR EACH MODEL, THE SOFTWARE IS DOWNLOADED FROM THE GLOBAL SERVER TO THE LOCAL SERVER LOCATED IN THE CHENNAI F ACTORY AND STORED THEREIN. IN TURN, EACH TIME A MOBILE HANDSET IS BE ING MANUFACTURED; THE SOFTWARE IS BEING INCORPORATED INTO EACH MOBILE HANDSET. WITH REGARD TO THE PAYMENT FOR THE SOFTWARE, I DON'T KNO W THE BASIS, QUANTUM AND NATURE OF THESE PAYMENTS. 76 ITA 3522/DEL/2013 15.5. NEXT STATEMENT OF SUBBAIAH CHOKALINGAM RECORD ED BY THE DDIT, CHENNAI U/S 131 OF THE ACT ON 7-2-2013, IS CONTAINE D AT PAGES 709-710 OF THE PB. RELEVANT QUESTIONS AND ANSWERS THERETO ARE REPR ODUCED BELOW: 2. PLEASE IDENTIFY YOURSELF ANS: I AM SUBBAIAH CHOKKALINGAM, STO SHRI M. CHOKKA LINGAM, AGED 41 RESIDING AT C-1S, SHANTI NIKETAN, WEST WOODS, KU NTRATHUR ROAD, MATHANANDAPURAM, PORUR. I AM, THE SUPPLY OPERATIONS MANAGER OF CHENNAI PLANT OF FV1/S NOKIA INDIA PRIVATE LIMITED, I AM WORKING SINCE MARCH 2011. 3. AS SUPPLY OPERATION MANAGER, CHENNAI PLANT OF M/ S NOKIA INDIA PRIVATE LIMITED (NIPL), WHAT ARE THE VARIOUS ACTIVI TIES THAT YOU LOOK AFTER? ANS: I AM RESPONSIBLE FOR PRODUCING PHONES AS PER O RDER BOOK AND PRODUCTION PLAN. 4. EXPLAIN ABOUT THE PROCESS OF GETTING ORDER BOOK AND HOW DO YOU PLAN YOUR PRODUCTION? ANS: ORDER BOOK IS A CONSOLIDATION OF NEED, FROM CU STOMERS AND CHANNEL PARTNERS (DISTRIBUTORS). BASED ON THE ORDER BOOK, THE PRODUCTION PLAN IS PREPARED. 5. PLEASE EXPLAIN THE MANUFACTURING/ASSEMBLING PROC ESS OF THE MOBILE PHONES MANUFACTURED IN THE CHENNAI PLANT OF M/S NOKIA INDIA PRIVATE LIMITED (NIPL)? ANS: THE MANUFACTURING PROCESS CONSISTS-OF THE FOL LOWING STEPS, 1. FIRST OF ALL, THE PRINTED CIRCUIT BOARDS ARE IMP ORTED FROM CHINA/TAIWAN. 2. THESE ARE LOADED TO MAGAZINE, THAT IS, SCREEN IM PRESSION FOR SOLDERING PURPOSES. 77 ITA 3522/DEL/2013 3. THEN IT WILL GO THROUGH THE PROCESS OF SMT (SURF ACE MOUNT TECHNOLOGY) WHEREIN, THE CAPACITORS, ICS, RESISTORS , SHIELD, LIGHT PROTECTIVE CAPS ETC ARE PLACED. 4. AFTER THIS PROCESS, THE COMPONENT IS PLACED AT A UTOMATED 'OPTIC INSPECTION FOR POSITION AND QUALITY TESTING. 5. AFTER THIS PROCESS, THEY SAME WILL BE PASSED TH ROUGH FINAL HEAT SHIELD CONNECTION AND PROTECTIVE CAP THROUGH REFLOW OVEN/HEATER. 6. AFTER ABOVE PROCESS IS OVER, ON THE SAID COMPON ENT, THE DOME SHEET IS PLACED 7. NEXT, ACF-(ASSEMBLING THE LCD TO THE BOARD) IS D ONE. UP TO THIS, THE PROCESS IS CALLED AS MODULE. AFTER THE MODULE, IN THE PROCESS OF PANEL FLASH, THE CORE SOFTWARE IS DOWNLOADED FROM T HE SERVER, LOCATED IN THE FACTORY, TO THE CHIP. THIS PANEL FLA SH IS THE HEART OF THE MOBILE PHONE. THE PRODUCT SERIAL NUMBER .(PSN) IS ASSIGNED DURING THE PANEL FLASH. 8. SUBSEQUENTLY, LIGHT GUIDE, PROTECTIVE SHIELD, D- COVER, CONNECTOR, M/S, SPEAKER ARE PLACED. 9. THEN, FINAL USER INTERFACE TESTS ARE CARRIED OU T. AT THIS STAGE, THE SEMI FINISHED PRODUCT IS CALLED AS THE ENGINE. 10. NOW THIS ENGINE IS FLASHED WITH LABEL SOFTWARE, WHERE THE CUSTOMER SETTINGS ARE LOADED IN THE MOBILE PHONE. 11. THE FINAL ASSEMBLY TOOL MECHANICS, WHICH IS KE Y MAT, A-COVER AND B-COVER, ARE PLACED. 6. WHAT ARE THE SOFTWARE THAT ARE USED IN THE MANUF ACTURING OF THE MOBILE PHONES THAT ARE MADE OUT OF CHENNAI AND AT WHAT STAGES, THE SOFTWARE ARE USED? ANS: THE MOBILE PHONES THAT ARE MANUFACTURED OUT OF THE CHENNAI PLANT ARE BASED ON SERIES-30 AND SERIES-40 PLATFORM S. FOR ANY MOBILE PHONE THAT IS LAUNCHED, THE SOFTWARE IS DES IGNED AND DEVELOPED BY NOKIA R&D. THIS SOFTWARE IS STORED IN THE GLOBAL SERVER IN FINLAND. WHEN A NEW MODEL OF MOBILE PHONE IS LAUNCHED IN THE CHENNAI FACTORY, THE BASIC SOFTWARE IS DOWNLOAD ED FROM THE GLOBAL SERVER AND STORED IN THE LOCAL SERVER IN THE CHENNAI FACTORY. EACH TIME A MOBILE PHONE IS BEING MANUFACTURED; THE SOFTWARE IS FLASHED AND TESTED IN THE HANDSET AT FOUR DIFFERENT STAGES DURING THE 78 ITA 3522/DEL/2013 MANUFACTURING PROCESS, PULLING THE SOFTWARE FROM TH E LOCAL SERVER LOCATED IN THE CHENNAI FACTORY. 1. THE FIRST PHASE OF SOFTWARE IS THE PANEL FLASH, WHE RE THE CORE SOFTWARE IS DOWNLOADED FROM THE LOCAL SERVER LOCATE D IN THE FACTORY INTO THE CHIP. THE PRODUCT SERIAL NUMBER IS GENERAT ED AT THIS STAGE. 2. THE SECOND STAGE IS THE ALIGNMENT TESTING STAGE WHE RE THE SOFTWARE ALIGNS THE RADIO FREQUENCY OF THE MOBILE HANDSETS. 3. THE THIRD PHASE IS CALLED AS THE FINAL USER INTERFA CE WHEREIN, THE SOFTWARE CHECKS THE FUNCTIONALITY OF THE MOBILE HAN DSETS. 4. THE FOURTH AND FINAL PHASE IS CALLED THE LABELING O F THE MOBILE HANDSETS, WHEREIN, THE CUSTOMER SETTINGS ARE DOWNL OADED IN THE MOBILE HANDSETS AND THE IMEI NUMBER IS ALSO GENER ATED. 7. PLEASE EXPLAIN, WHERE FROM THESE SOFTWARES, WHIC H ARE USED IN, THE MOBILE HANDSETS ARE OBTAINED AND HOW ARE THEY STORE D AND FINALLY INTO THE MOBILE HANDSETS? AND ALSO, EXPLAIN HOW ARE THEY PAID FOR? ANS: THESE SOFTWARE ARE DESIGNED AND DEVELOPED AT V ARIOUS R& D SITES OF NOKIA CORPORATION. THEN, THESE SOFTWARES A RE STORED AT THE GLOBAL SERVER OF NOKIA CORPORATION LOCATED IN FINL AND. AS EXPLAINED EARLIER, FOR EACH MODEL, THE SOFTWARE IS DOWNLOADED FROM THE GLOBAL SERVER TO THE LOCAL SERVER LOCATED IN THE CHENNAI F ACTORY AND STORED THEREIN. IN TURN, EACH TIME A MOBILE HANDSET IS BE ING MANUFACTURED; THE SOFTWARE IS BEING INCORPORATED INTO EACH MOBILE HANDSET. WITH REGARD TO THE PAYMENT FOR THE SOFTWARE, I DON'T KNO W THE BASIS, QUANTUM AND NATURE OF THESE PAYMENTS. 15.6. NEXT STATEMENT OF K.S. NARAYANMURTHY RECORDED BY THE DDIT, CHENNAI U/S 131 OF THE ACT ON 7-2-2013, IS CONTAINE D AT PAGES 681-685 OF THE PB. RELEVANT QUESTIONS AND ANSWERS THERETO ARE REPR ODUCED BELOW: 2. PLEASE IDENTIFY YOURSELF ANS: I AM K S NARAYANAMURTHY, SLO N. SAMBAMORTHY, A GED 35 RESIDING AT NO.4, BHARATHYDASAN STREET, NEW PERUNGA LATHUR, CHENNAI-63. I AM THE CAPABILITY MANAGER FOR FACTORY SUPPORT AND DEPLOYMENT OF CHENNAI PLANT OF M/S NOKIA INDIA PRIV ATE LIMITED. I AM WORKING IN NIPL SINCE MARCH 2007. 79 ITA 3522/DEL/2013 3. AS CAPABILITY MANAGER FOR FACTORY SUPPORT AND DE PLOYMENT, CHENNAI PLANT OF M/S NOKIA INDIA PRIVATE LIMITED (N IPL), WHAT ARE THE VARIOUS ACTIVITIES THAT YOU LOOK AFTER? ANS: I AM MANAGING A TEAM WHICH SUPPORTS TIER-2 MOD EL FOR MANUFACTURING AND EXECUTION SYSTEM, DATA CENTER (SE RVER ROOM), PRINTER AND NET WORK . 4. AS THE DATA CENTER MANAGER, WHAT ARE THE DIFFERE NT SERVERS THAT YOU MAINTAIN? ANS:- AS THE DATA CENTER MANAGER, I MAINTAIN AROUND 50 SERVERS OF THE FACTORV, WHICH INCLUDE MAINLY IMES SERVER, DOMA IN CONTROLLER, 885, DCT4, ETC. 5. PLEASE EXPLAIN THE PROCESS THROUGH WHICH YOU UPD ATE THE SOFTWARE IN THE EXISTING MODELS OR IN NEW MODELS IN THE IMES SERVER. ANS: IN FACT, THE UPDATING OF THE SOFTWARE EITHER N EW OR EXISTING IS DONE THE VARIANT MANAGER AND HIS TEAM (NAMELY MR. E . UMA SHANKAR). AS I UNDERSTAND FROM WHAT HE TOLD ME THAT ANY CHANGE IN THE EXISTING MODEL - THE INTRODUCTION OF NEW MODEL IS COMMUNICATED TO HIM THROUGH PDM VIA ECN. AS FAR AS SOFTWARE IS C ONCERNED, IT IS DIRECTLY DOWNLOADED INTO THE LOCAL IMES SERVER LOC ATED IN THE CHENNAI FACTORY. HE ALONG WITH HIS TEAM ACCESS IT A ND CHECK IT FOR THE PRESENCE OF ANY FUNCTIONAL IRREGULARITIES/DEFEC TS. IN CASE, THERE ARE ANY, HE GETS THEM RECTIFIED BY THE GLOBAL R&D T EAM BY HIGHLIGHTING THE SAME. IN ALL, HIS ROLE AS FAR AS W ARE IS CONCERNED TO MAKE IT READY TO BE USED IN THE CHENNAI FACTORY PRO DUCTION. ONCE THIS IS OVER, THE SOFTWARE IS READY FOR FLASHING IN TO THE HANDSETS BY THE PRODUCTION TEAM. 6. PLEASE EXPLAIN THE MANUFACTURING/ASSEMBLING PROC ESS OF THE MOBILE PHONES MANUFACTURED IN THE CHENNAI PLANT OF M/S NOKIA INDIA PRIVATE LIMITED (NIPL)? 1. FIRST OF ALL, THE PRINTED CIRCUIT BOARDS ARE IMP ORTED FROM CHINA/TAIWAN. 2. THESE ARE LOADED TO MAGAZINE, THAT IS, SCREEN IM PRESSION FOR SOLDERING PURPOSES. 80 ITA 3522/DEL/2013 3. THEN IT WILL GO THROUGH THE PROCESS OF SMT (SURF ACE MOUNT TECHNOLOGY) WHEREIN, THE CAPACITORS, ICS, RESISTORS , SHIELD, LIGHT PROTECTIVE CAPS ETC ARE PLACED. 4. AFTER THIS PROCESS, THE COMPONENT IS PLACED AT A UTOMATED 'OPTIC INSPECTION FOR POSITION AND QUALITY TESTING. 5. AFTER THIS PROCESS, THEY SAME WILL BE PASSED TH ROUGH FINAL HEAT SHIELD CONNECTION AND PROTECTIVE CAP THROUGH REFLOW OVEN/HEATER. 6. AFTER ABOVE PROCESS IS OVER, ON THE SAID COMPON ENT, THE DOME SHEET IS PLACED 7. NEXT, ACF-(ASSEMBLING THE LCD TO THE BOARD) IS D ONE. UP TO THIS, THE PROCESS IS CALLED AS MODULE. AFTER THE MODULE, IN THE PROCESS OF PANEL FLASH, THE CORE SOFTWARE IS DOWNLOADED FROM T HE SERVER, LOCATED IN THE FACTORY, TO THE CHIP. THIS PANEL FLA SH IS THE HEART OF THE MOBILE PHONE. THE PRODUCT SERIAL NUMBER .(PSN) IS ASSIGNED DURING THE PANEL FLASH. 8. SUBSEQUENTLY, LIGHT GUIDE, PROTECTIVE SHIELD, D- COVER, CONNECTOR, MIC, SPEAKER ARE PLACED. 9. THEN, FINAL USER INTERFACE TESTS ARE CARRIED OU T. AT THIS STAGE, THE SEMI FINISHED PRODUCT IS CALLED AS THE ENGINE. 10. NOW THIS ENGINE IS FLASHED WITH LABEL SOFTWARE, WHERE THE CUSTOMER SETTINGS ARE LOADED IN THE MOBILE PHONE. 11. THE FINAL ASSEMBLY TOOL MECHANICS, WHICH IS KE Y MAT, A-COVER AND B-COVER, ARE PLACED. 7. WHAT ARE THE SOFTWARE THAT ARE USED IN THE MANUF ACTURING OF THE MOBILE PHONES THAT ARE MADE OUT OF CHENNAI AND AT WHAT STAGES, THE SOFTWARE ARE USED? ANS: THE MOBILE PHONES THAT ARE MANUFACTURED OUT OF THE CHENNAI PLANT ARE BASED ON SERIES-30 AND SERIES-40 PLATFORM S. FOR ANY MOBILE PHONE THAT IS LAUNCHED, THE SOFTWARE IS DES IGNED AND DEVELOPED BY NOKIA R&D. THIS SOFTWARE IS STORED IN THE GLOBAL SERVER IN FINLAND. WHEN A NEW MODEL OF MOBILE PHONE IS LAUNCHED IN THE CHENNAI FACTORY, THE BASIC SOFTWARE IS DOWNLOAD ED FROM THE GLOBAL SERVER AND STORED IN THE LOCAL SERVER IN THE CHENNAI FACTORY. EACH TIME A MOBILE PHONE IS BEING MANUFACTURED; THE SOFTWARE IS FLASHED AND TESTED IN THE HANDSET AT FOUR DIFFERENT STAGES DURING THE 81 ITA 3522/DEL/2013 MANUFACTURING PROCESS, PULLING THE SOFTWARE FROM TH E LOCAL SERVER LOCATED IN THE CHENNAI FACTORY. 1. THE FIRST PHASE OF SOFTWARE IS THE PANEL FLASH, WHE RE THE CORE SOFTWARE IS DOWNLOADED FROM THE LOCAL SERVER LOCATE D IN THE FACTORY INTO THE CHIP. THE PRODUCT SERIAL NUMBER IS GENERATED AT THIS STAGE. 2. THE SECOND STAGE IS THE ALIGNMENT TESTING STAGE WHE RE THE SOFTWARE ALIGNS THE RADIO FREQUENCY OF THE MOBILE H ANDSETS. 3. THE THIRD PHASE IS CALLED AS THE FINAL USER INTERFA CE WHEREIN, THE SOFTWARE CHECKS THE FUNCTIONALITY OF THE MOBILE HAN DSETS. 4. THE FOURTH AND FINAL PHASE IS CALLED THE LABELING O F THE MOBILE HANDSETS, WHEREIN, THE CUSTOMER SETTINGS ARE DOWNL OADED IN THE MOBILE HANDSETS AND THE IMEI NUMBER IS ALSO GENER ATED. 7. PLEASE EXPLAIN, WHERE FROM THESE SOFTWARES, WHIC H ARE USED IN, THE MOBILE HANDSETS ARE OBTAINED AND HOW ARE THEY STORE D AND FINALLY INTO THE MOBILE HANDSETS? AND ALSO, EXPLAIN HOW ARE THEY PAID FOR? ANS: THESE SOFTWARE ARE DESIGNED AND DEVELOPED AT V ARIOUS R& D SITES OF NOKIA CORPORATION. THEN, THESE SOFTWARES A RE STORED AT THE GLOBAL SERVER OF NOKIA CORPORATION LOCATED IN FINL AND. AS EXPLAINED EARLIER, FOR EACH MODEL, THE SOFTWARE IS DOWNLOADED FROM THE GLOBAL SERVER TO THE LOCAL SERVER LOCATED IN THE CHENNAI F ACTORY AND STORED THEREIN. IN TURN, EACH TIME A MOBILE HANDSET IS BE ING MANUFACTURED; THE SOFTWARE IS BEING INCORPORATED INTO EACH MOBILE HANDSET. WITH REGARD TO THE PAYMENT FOR THE SOFTWARE, I DON'T KNO W THE BASIS, QUANTUM AND NATURE OF THESE PAYMENTS. 15.7. NEXT STATEMENT OF LASITHA P. ASHOKAN RECORDE D BY THE DDIT, CHENNAI U/S 131 OF THE ACT ON 7-2-2013, IS CONTAINE D AT PAGES 686-687 OF THE PB. RELEVANT QUESTIONS AND ANSWERS THERETO ARE REPR ODUCED BELOW: 2. PLEASE IDENTIFY YOURSELF ANS: I AM LASITHA P ASHOKAN, WLO SARATH MOHAN, AGED 38 RESIDING AT D- - SOUTHERN SHELTERS, 2/137, MOUNT POONAMALLEE ROAD, KATTUPAKKAM, CHENNAI-56 . I AM THE AVAILABILITY HEA D' ELECTRO MECHANICS, IN THE TEAM OF MECHANICS SOLUTIONS SOURC ING AVAILABILITY MANAGEMENT IN CHENNAI PLANT OF M/S NOKIA INDIA PRIV ATE LIMITED. I AM WORKING IN NIPL SINCE MAY 2006. 82 ITA 3522/DEL/2013 2. AS AVAILABILITY HEAD ELECTRO MECHANICS IN CHENNAI P LANT OF M/S NOKIA INDIA PRIVATE LIMITED (NIPL), WHAT ARE THE VA RIOUS ACTIVITIES THAT YOU LOOK AFTER? ANS: MY ROLE IS TO ENSURE AVAILABILITY OF ELECTRO M ECHANICS COMMODITY USED IN THE MOBILE HANDSETS PRODUCED AT N OKIA FACTORIES ALL OVER THE WORLD, NAMELY CHENNAI, BEIJING IN CHIN A, DONGGUAN IN CHINA, MASAN IN KOREA AND MANAUS IN BRAZIL. 15.8. NEXT STATEMENT OF VISHAL MANKHOTIA RECORDED B Y THE DDIT, CHENNAI U/S 131 OF THE ACT ON 7-2-2013, IS CONTAINED AT PAG ES 709-710 OF THE PB. RELEVANT QUESTIONS AND ANSWERS THERETO ARE REPRODUC ED BELOW: 2. PLEASE IDENTIFY YOURSELF ANS: I AM VISHAL MANKOTIA S/O LT. GENERAL PC MANKOT IA AGED 41 RESIDENT AT W-45, 7 TH STREET, ANNA NAGAR, CHENNAI. I AM THE MANAGER PLANNING AND LOGISTICS IN CHENNAI PLANT OF M/S NOKI A INDIA PRIVATE LIMITED. I AM WORKING IN NIPL SINCE MAY 2011. 3. AS MANAGER PLANNING AND LOGISTICS IN CHENNAI PLANT OF M/S NOKIA INDIA PRIVATE LIMITED (NIPL), WHAT ARE THE VA RIOUS ACTIVITIES THAT YOU LOOK AFTER? ANS: MY ROLE IS TO PLAN FOR THE PRODUCTION IN THE F ACTORY, LOOKING AFTER THE LOGISTICS OF FINISHED GOODS. 16. WE HAVE EXTENSIVELY EXTRACTED FROM THE STATEME NTS IN ORDER TO DEMONSTRATE THAT ALL THE PERSONS WHOSE STATEMENTS W ERE RECORDED WERE EITHER CONTROLLING THE OPERATIONS OR WERE IN DIRECT CHARGE OF THE MANUFACTURING OF THE MOBILE PHONES. THEY HAVE SPECIFICALLY POINTED O UT THE ROLE PLAYED BY THEM IN THE MANUFACTURING PROCESS AND WERE FULLY CO NVERSANT ABOUT THE INTRICACIES OF THE WHOLE MANUFACTURING PROCESS. THE Y WERE ALL TECHNICAL 83 ITA 3522/DEL/2013 PERSONS, CONTROLLING THE ENTIRE MANUFACTURING PROCE SS. DETAILED DIRECT QUESTIONS WERE PUT TO THEM TO WHICH THEY REPLIED WI THOUT ANY RESERVATIONS. WHEREVER THEY WERE NOT CONVERSANT WITH THE FACTS, T HEY REPLIED SO. THERE WAS NO OCCASION FOR THEM TO DISTORT, IN ANY MANNER , THE TECHNICAL ASPECTS AND, THEREFORE, THERE WAS NO OCCASION TO PUTTING T HEM FOR CROSS-EXAMINATION. FURTHER, THESE TECHNICAL PERSONS NEVER QUESTIONED, EITHER THEMSELVES OR THROUGH THEIR EMPLOYER, THE REPLIES SO RECORDED OR COMPLAINED OF ANY COERCION, UNDUE INFLUENCE OR THREAT. THE CONTENTS AND FACTS OF THESE STATEMENTS HAVE NEVER BEEN QUESTIONED BY THEM. WE F IND CONSIDERABLE FORCE IN THE SUBMISSION OF LD. SPL. COUNSEL THAT ASSESSEE NEVER POINTED OUT ANY FACTUAL INACCURACY IN ANY OF THE STATEMENTS AND NEV ER CAME OUT WITH ANY MATERIAL TO PROVE OTHERWISE. FURTHER, THE EMPLOYEES ONLY STATED ABOUT THE MANUFACTURING PROCESS AND ABOUT THEIR ROLE IN THE S AME AND THESE STATEMENTS HAVE BEEN UTILIZED AS A CORROBORATIVE EVIDENCE BY T HE AO IN ARRIVING AT HIS CONCLUSION. THEREFORE, HERE IT IS NOT A CASE WHERE ONLY ON THE BASIS OF STATEMENTS OF EMPLOYEES ANY CONCLUSION HAS BEEN DRA WN BY THE AO. HE HAS TAKEN SUPPORT FROM THESE STATEMENTS FOR ARRIVING AT HIS CONCLUSION ON THE BASIS OF AGREEMENTS, E-MAILS, INVOICES, TECHNICAL E XPERTS REPORT ETC. . IT IS WELL SETTLED LAW THAT BEFORE THE PLEA OF CROSS EXAM INATION IS ADVANCED, IT HAS TO BE SHOWN THAT THE PARTY SEEKING CROSS EXAMINATIO N IS AN ADVERSELY AFFECTED PARTY BY THE EVIDENCE (IN PRESENT CASE STATEMENTS O F EMPLOYEES) PLACED ON RECORD. IN THE PRESENT CASE THE CONTENTS OF STATEME NTS HAVE NOT AT ALL BEEN DISPUTED BY ASSESSEE AND, THEREFORE, IT CANNOT BE S AID THAT ASSESSEE IS AN ADVERSELY AFFECTED PARTY BY THESE STATEMENTS. 17. NOW COMING TO THE ISSUE REGARDING TIMING FOR R AISING THE PLEA REGARDING CROSS-EXAMINATION BY ASSESSEE. IN THIS RE GARD WE FIND THAT ALL THE 84 ITA 3522/DEL/2013 STATEMENTS WERE DULY PROVIDED TO ASSESSEE AND DURI NG THE PROCEEDINGS BEFORE THE AO, THE ASSESSEE NEVER ASKED FOR CROSS-E XAMINATION. 17.1. IT WAS ONLY AFTER FILING OF APPEAL THAT THE A SSESSEE IN DETAILED SUBMISSIONS DATED 2-5-2013 BEFORE CIT(A)-29, CONTAI NED AT PAGES 221 TO 260 OF THE PB, IN PARA 2.1, REQUESTED FOR CROSS-EX AMINATION. THEREAFTER VIDE LETTER DATED 3-5-2013, THE ASSESSEE AGAIN REQUESTED FOR CROSS-EXAMINATION OF SUCH INDIVIDUALS, AS WAS NECESSARY. THE ASSESSEE FU RTHER STATED AS UNDER: IT IS, THEREFORE, IMPERATIVE AS A BASIC PREREQUISI TE THAT IN THE INTEREST OF ADMINISTRATION OF JUSTICE AND THE PRINC IPLES OF NATURAL JUSTICE, THE APPELLANT SHOULD BE ALLOWED TO PRESENT ITS CASE IN A MORE EFFECTIVE MANNER BEFORE YOUR GOODSELF. IN ORDE R TO ENABLE THE APPELLANT TO PRESENT ITS CASE IN AN EFFECTIVE M ANNER, THE APPELLANT SHOULD BE PROVIDED: ADEQUATE OPPORTUNITY TO FILE ADDITIONAL EVIDENCE IN SUPPORT OF ITS CLAIMS, FOR WHICH NO OPPORTUNITY WAS GRANTED DU RING THE COURSE OF ASSESSMENT PROCEEDINGS AND TO EXPLAIN VAR IOUS INTRICACIES AND COMPLEX LEGAL ISSUES INVOLVED IN TH E MATTER. OPPORTUNITY TO CROSS-EXAMINE THE INDIVIDUALS WHOSE STATEMENTS WERE RELIED UPON, WHILE FRAMING THE ASSESSMENT. OPPORTUNITY TO CROSS-EXAMINE THE MEMBERS OF CYBER F ORENSIC DIVISION OF THE CENTRAL FORENSIC SCIENCE LABORATORY (CFSL) WHO PREPARED INTERIM REPORT ON END USER SOFTWARE DO WNLOAD PROCAESS; OPPORTUNITY TO REBUT VARIOUS OBSERVATIONS AND INTER PRETATIONS OF THE LD. AO 17.2. THEREAFTER VIDE LETTER DATED 6-5-2013 THE ASS ESSEE AGAIN PRIMARILY REQUESTED FOR PROVIDING AN OPPORTUNITY TO CROSS-EXA MINE MR. SASTRI K. PANJALA. VIDE LETTER DATED 8-5-2013 THE ASSESSEE AG AIN, INTER ALIA, SUBMITTED AS UNDER: S REGARDS THE HEARING WE HAD ALREADY REQUESTED YO UR GOODSELF TO CLARIFY IF THE APPELLANT WILL BE GIVEN AN OPPORTUNI TY TO CROWS-EXAMINE WITNESSES AND TENDER ADDITIONAL EVIDENCE IN LETTERS DATED 3-5-2013 AND 6-5-2013. IN THIS REGARD, WE HAD SUBMITTED THAT OUR SUBMISSIONS 85 ITA 3522/DEL/2013 ON MERITS WILL DEPEND ON THE AFORE-MENTIONED OPPORT UNITIES AND WE HUMBLY REQUEST YOUR GOODSELF TO CLARIFY THE ABOVE. WITHOUT PREJUDICE TO THE ABOVE AND OUR RIGHTS TO CROSS EXAMINE WITNES SES, TENDERING ADDITIONAL EVIDENCE AND SUBMITTING ADDITIONAL SUBMI SSIONS, WE WILL ALSO REQUEST YOUR GOODSELF TIME TILL NEXT WEEK TO S UBMIT OUR CASE ON MERITS. 17.3. FROM THE CONTENTS OF ABOVE LETTERS IT IS EVID ENT THAT ASSESSEE HAD REQUESTED FOR PROVIDING CROSS EXAMINATION BUT THE M AIN THRUST WAS ON THE CROSS-EXAMINATION OF MR. SHASTRI AND AFTER HIS CROS S-EXAMINATION ONLY, THE ASSESSEE CLEARLY STATED THAT IT WOULD BE IN A POSIT ION TO TAKE A CALL FOR CROSS- EXAMINATION OF OTHER PERSONS. 17.4. VIDE LETTER DATED 17-5-2013 ( PAGE 271 TO 428 OF THE PB), THE ASSESSEE AGAIN REQUESTED FOR CROSS-EXAMINATION AS REQUESTED IN LETTERS DATED 2-3-2013, 3-5-2013, 6-5-2013 AND 8-5-2013. 17.5. ON 20-5-2013 MR. SHASTRI WAS CROSS-EXAMINED B Y THE ASSESSEE. ON 21-5-2013 AGAIN MR. SHASTRI WAS RE-EXAMINED BY THE ASSESSEE. ON 23-5-2013 THE ASSESSEE MADE INTERIM SUBMISSIONS BEFORE LD. CI T(A) AND AGAIN FILED DETAILED REPLY, INTER ALIA, SUBMITTING THAT FINAL R ESPONSE COULD BE SUBMITTED AFTER CROSS-EXAMINING MR. SHASTRI. HOWEVER, IT IS TO BE NOTED THAT AS PER THE NOTINGS MADE BY LD. CIT(A) IN HIS ORDER, MR. SHASTR I WAS CROSS-EXAMIONED ON 20 & 21-5-2013. THEREAFTER, ASSESSEE FILED A DET AILED REPLY ON 24-5-2013 IN RESPONSE TO QUERIES RAISED BY LD. CIT(A) AND FUR THER SUBMISSIONS BASED ON CROSS-EXAMINATION AND RE-EXAMINATION OF MR. SHASTRI AND ALSO RESPONSE TO THE SUPPLEMENTARY REPLIES FILED BY THE DDIT, INTERN ATIIONAL TAXATION, CIRCLE 2(1) DATED 23-5-2013. IT IS PERTINENT TO NOTE AT T HIS JUNCTURE THAT ASSESSEE DID NOT ASK FOR CROSS-EXAMINATION OF OTHER EMPLOYEES IN THIS LETTER AND, THEREFORE, DID NOT PURSUE ITS CLAIM REGARDING CROSS-EXAMINATIO N OF OTHER EMPLOYEES. 86 ITA 3522/DEL/2013 FURTHER, THE DEPARTMENT HAS FILED BEFORE US, COPY O F LETTER DATED 2-5-2013, OBTAINED FROM THE FILE OF LD. CIT(A) AND POINTED O UT THAT IN PARA 2.1 LD. CIT(A) BY HIS HAND HAS WRITTEN AS UNDER: PLEASE SPECIFY ? 17.6. HOWEVER, THE ASSESSEE DID NOT POINT OUT AS TO WHICH EMPLOYEE IT WANTED TO CROSS-EXAMINE. LD. COUNSEL POINTED OUT TH AT IN THE ORDER-SHEET NOTINGS LD. CIT(A) HAS NOT MENTIONED ABOUT THIS FAC T. IN OUR OPINION, CONSIDERING THE COMPLEXITIES OF PROCEEDINGS, THESE TECHNICAL ASPECTS HAVE NO RELEVANCE. FURTHER, BEFORE US ALSO THE ASESSEE WAS ASKED TO SP ECIFY THE EMPLOYEES TO WHOM THEY WANTED TO CROSS-EXAMINE AND IN RESPONSE T HEREOF, THE ASSESSEE HAS FILED THE FOLLOWING LETTER: THE HONOURABLE MEMBERS BENCH 'E' INCOME TAX APPELLATE TRIBUNAL LOKNAYAK BHAWAN, KHAN MARKET NEW DELHI DEAR SIRS, SUB: SUBMISSION OF NAMES OF PERSONS THE APPELLANT WISHES TO CROSS- EXAMINE RE: SUBMISSIONS OF ARGUMENTS ON THE OPPORTUNITY TO CROSS-EXAMINE PERSONS SUBMITTED TO THE HON'BLE TRIBUNAL ON 18TH D ECEMBER, 2014. AS DIRECTED BY THE HON'BLE BENCH TO SUBMIT THE NAME S OF THE PERSONS THE APPELLANT WISHES TO CROSS-EXAMINE; WE ON BEHALF OF AND UNDER INSTRUCTIONS OF THE APPELLANT SUBMIT AS FOLLOWS: IN CONTINUATION OF THE SUBMISSIONS FILED ON 18TH DE CEMBER REQUESTING AN OPPORTUNITY TO CROSS- EXAMINE WITNESSES WHOSE STATE MENTS HAVE BEEN RELIED UPON BY THE RESPONDENT; WE WOULD LIKE TO POI NT OUT THAT THE 87 ITA 3522/DEL/2013 RESPONDENT HAS RELIED ON ALL THE STATEMENTS RECORDE D DURING THE SURVEY AND POST SURVEY PROCEEDINGS AGAINST THE APPELLANT. FURT HER, THE -RESPONDENT HAS ON PAGE 47 OF THE ORDER (ILLUSTRATIVELY FOR A Y 2007-08) HAS STATED THAT ALL THE STATEMENTS RECORDED BY THE INCOME TAX AUTHO RITIES HAVE BEEN PROVIDED TO THE APPELLANT AND ARE BEING RELIED UPON . SIMILARLY, ON PAGE 56 OF THE ORDER THE RESPONDENT HAS AGAIN STATED THAT T HE FACTUAL MATRIX OF THE CASE HAS BEEN GATHERED FROM THE RECORDED STATEMENTS . HOWEVER, THE RESPONDENT IN THE ASSESSMENT ORDERS DA TED 15.03.2013 HAS EXPRESSLY RELIED ON THE STATEMENTS OF THE FOLLOWING PERSONS: 1. JITENDRA GROVER 2. ARJA BJORKLUND 3. PRAKASH KATAMA ~ 4. E. UMA SHANKAR 5. K.S. NARAYANAMURTHY 6. V. SEMBIAN 7. NIKHIL GOPALKRISHNAN -' 8. SUBBIAH CHOKHALINGAM 9. LASITHA P. ASHOKAN 10. VISHAL MANKHOTIA THE PERSONS APPEARING IN SERIAL NO. 3-10 HAVE COMME NTED UPON HE TECHNICAL PROCESS OF MANUFACTURING PHONES WHEREAS M R. JITENDRA GROVER HAS COMMENTED UPON THE PRICING OF THE SOFTWARE PURC HASED BY THE APPELLANT AND MS. ARJA BJORKLUND HAS COMMENTED UPON THE AGREEMENT FOR PURCHASE OF SUCH SOFTWARE. THE RESPONDENT DURING THE COURSE OF HEARING BEFORE THIS TRIBUNAL HAS FURTHER FILED THE STATEMENTS OF THE FOLLOWING PERSO NS WITH THE INTENTION OF RELYING UPON THEM: 11. P. RAVINDRAN 12. SANTOSH KULKARNI 13. GERALD LAWRENCE 14. N. GANESH 15. USHA RAJEEV 16. ANUPAM DHAWAN 17. AVIJIT MUKERJI 18. TARUN ARORA 19.D. INDRAGIRI RAJ KUMAR 20. RAHUL SOOD 21.P. BALAJI 22. R. RAMACHANDRAN 88 ITA 3522/DEL/2013 WHILE THE RESPONDENT HAS MAINTAINED THAT ALL STATEM ENTS HAVE BEEN RELIED UPON, WE WISH TO LIMIT OUR CROSS-EXAMINATION TO SUC H WITNESSES WHOSE STATEMENTS HAVE BEEN SPECIFICALLY RELIED UPON OR WILL BE RELIED UPON. IN THIS REGARD, WE WOULD REQUE ST THE BENCH TO GRANT US AN OPPORTUNITY TO CROSS-EXAMINE ANY OR ALL OF THE A FOREMENTIONED 22 PERSONS. WE WOULD LIKE TO SUBMIT THAT THE APPELLANT HAS ALWA YS MAINTAINED THAT IT BE ALLOWED TO CROSS- EXAMINE SUCH PERSONS WHOSE STA TEMENTS THE INCOME TAX AUTHORITIES ARE RELYING UPON AND HENCE, THE PRE SENT REQUEST IS IN CONSONANCE WITH OUR EARLIER REQUESTS. WE WOULD FURT HER HUMBLY REQUEST THE BENCH TO DIRECT THE RESPONDENT TO NOT RELY ON S TATEMENTS OF ANY OTHER WITNESSES (OTHER THAN THE 22 PERSONS MENTIONED ABOV E) WITHOUT FIRST AFFORDING THE APPELLANT AN OPPORTUNITY TO CROSS- EX AMINE THEM. 17.7. IN THIS LETTER ALSO THE ASSESSEE HAS NOT SPE CIFIED SPECIFIC EMPLOYEES TO WHOM IT WANTED TO CROSS-EXAMINE. 18. WE HAVE GONE THROUGH THE PROCEEDINGS FROM INCEP TION AND FIND THAT AUTHORITIES BELOW HAVE ACTED JUSTLY TO ASSESSEE BY PROVIDING STATEMENTS OF ALL EMPLOYEES, EX EMPLOYEES, CFL REPORTS ETC. HAVING RE GARD TO THE NATURE OF DISPUTE, WE ARE OF THE OPINION THAT PRINCIPLES OF N ATURAL JUSTICE HAVE BEEN COMPLIED WITH BY AFFORDING FAIR HEARING TO ASSESSEE . THE ASSESSEE HAS BEEN IMPARTED SUBSTANTIAL JUSTICE ON THIS COUNT. IN COUR SE OF HEARING LD. COUNSEL FAIRLY ACCEPTED THAT THE WITNESSES WERE NOT HOSTI LE. THIS WAS SO BECAUSE THEY WERE THE ASSESSEES EMPLOYEES AND WERE OCCUPYI NG THE SENIOR MOST POSITION IN THE OPERATION. CONSIDERING ALL THESE AS PECTS, WE FIND CONSIDERABLE FORCE IN THE CONTENTION OF LD. SPECIAL COUNSEL THA T TIMING OF RAISING THIS PLEA AT SUCH A LATER STAGE OF PROCEEDINGS IS NOT JUSTIFI ED . IF THE ASSESSEE WAS VERY SERIOUS ABOUT THIS PLEA THEN IT SHOULD HAVE BEEN TA KEN ON THE VERY FIRST DATE 89 ITA 3522/DEL/2013 OF HEARING AND NOT WHEN REVENUE WAS REPLYING TO TH E DETAILED SUBMISSIONS ADVANCED BY ASSESSEE ON MERITS. 18.1. THE SUBMISSIONS OF LD. COUNSEL, HOWEVER, IS THAT THEY WERE NOT KNOWING AS TO WHAT WERE THE SETTINGS IN SAP; HOW TH E SOFTWARE PRODUCT WAS MANUFACTURED AND SEALED IN BINARY CODING, WHICH COU LD NOT BE TAMPERED WITH. LD. COUNSEL HAS ALSO IN ITS WRITTEN SUBMISSIO NS SUBMITTED THAT WHILE INSTRUCTING THE CFSL INVESTIGATOR, THE LD. DDIT, CH ENNAI DID NOT GIVE HIM A COMPLETE BRIEF, AND THE SAME IS TRUE FOR THE EXAMIN ATION OF WITNESSES AS WELL. ALTHOUGH THE LD. DDIT, CHENNAI WAS AWARE THAT THE S OFTWARE ID KEY COULD BE GENERATED FROM THE DATABASE AND LINKED TO THE IM EI AND PS NUMBER OF THE PHONES AND THESE FACTS AND DETAILS WERE PRESENT IN THE DATABASE, THIS ASPECT WAS COMPLETELY IGNORED AND SUPPRESSED. FURTHER, THE DETAILS GIVEN BY THE PROCESS ENGINEERING MANAGER, V. SEMBIAN ON FEBRUARY 8, 2013 IN THE COURSE OF ACTUAL SURVEY IN RELATION TO THE TWO MOBI LE HANDSETS CLEARLY SHOWING THE IMEI, THE PSN AND SOFTWARE ID NUMBERS W ERE MENTIONED. THERE WERE NO FOLLOW-UP QUESTIONS IN THIS REGARD AN D THE FACT THAT THE LD. DDIT, CHENNAI WAS SHOWN THESE FACTS AND DETAILS AFT ER THEY WERE DOWNLOADED FROM THE DATABASE IS NOT BORNE OUT BY TH E STATEMENT OF MR. V. SEMBIAN. FACTS AND DETAILS LIKE THESE COULD EMERGE FROM THE CROSS- EXAMINATION AND WOULD GO ON TO SUPPORT THE APPELLAN T'S CASE. IT IS SUBMITTED THAT LD. DDIT, CHENNAI GRILLED THE WITNESSES ON THE SAME SET OF QUESTIONS AND GOT PRE MEDITATED ANSWERS. THE QUESTIONS WERE O NE-SIDED AND LEADING, AND WERE DESIGNED TO PROVE NON-EXISTENCE ONLY OF SO FTWARE KEYS IN THE PHONE. THEREFORE, HE SUBMITTED THAT COMPLETE FACTS LIKE THE ONES MENTIONED ABOVE HAVE NOT BEEN BROUGHT OUT BY THE STATEMENTS R ECORDED BY LD. DDIT, CHENNAI AND THEY CAN ONLY BE BROUGHT OUT BY CROSS-E XAMINING THE WITNESSES. 90 ITA 3522/DEL/2013 AS FAR AS SUBMISSIONS WITH REFERENCE TO CFSL REPORT ARE CONCERNED, MR. SHASTRI WAS CROSS EXAMINED BY ASSESSEE BEFORE LD. C IT(A) AND, THEREFORE, THE OBJECTIONS QUA CFSL REPORT CANNOT BE SUSTAINED. HOW EVER, A CLOSE EXAMINATION OF LD. SR. COUNSELS SUBMISSION MAKES I T VERY CLEAR THAT PRIMARILY ASSESSEES ENDEAVOUR IS TO SEEK CERTAIN CLARIFICATIONS FROM EMPLOYEES ON TECHNICAL ASPECTS. THE EMPLOYEES, WHOS E STATEMENTS WERE RELIED BY AO, WERE HIGHLY TECHNICAL PERSONS, CONTRO LLING THE ENTIRE MANUFACTURING OPERATIONS AND, THEREFORE, IT CANNOT BE ACCEPTED THAT THEY WERE NOT AWARE OF VARIOUS TECHNICALITIES OF THE ENT IRE MANUFACTURING PROCESS. THE REPLIES GIVEN BY THEM HAVE NOT BEEN DISPUTED/ C ONTROVERTED BY ASSESSEE IN ANY MANNER. THE SUBMISSION IS THAT QUESTIONS PUT DURING RECORDING OF STATEMENTS WERE NOT TAKEN TO ITS LOGICAL END. THERE FORE, TAKING AN HOLISTIC VIEW OF THE ENTIRE GAMUT OF PROCEEDINGS, WE ARE OF THE OPINION THAT NO IRREGULARITY HAS CREPT IN DURING COURSE OF PROCEEDI NGS BEFORE AO/ CIT(A) AND, THEREFORE, THE ORDERS OF BOTH THE LOWER AUTHOR ITIES ARE NOT REQUIRED TO BE SET ASIDE, AS THE MATTER IS NOT REQUIRED TO BE REST ORED TO AO/ CIT(A) TO CORRECT ANY IRREGULARITY. HOWEVER, KEEPING IN VIEW THE SUBMISSIONS OF LD. SR. COUNSEL, NOTED ABOVE, IN ORDER TO IMPART SUBSTANTIA L JUSTICE TO BOTH THE PARTIES, WE ARE OF THE OPINION THAT A SUPPLEMENTARY REPORT SHOULD BE SUBMITTED BY AO ON VARIOUS ISSUES POINTED OUT BY LD . SR. COUNSEL IN HIS WRITTEN SUBMISSIONS PLACED ON RECORD, IF NECESSARY, AFTER SEEKING CLARIFICATIONS FROM EMPLOYEES. IF SO REQUIRED BY AO , THE ASSESSEE WILL PROVIDE THE AO, COMPLETE DETAILS OF EMPLOYEES, FROM WHOM CLARIFICATION IS TO BE SOUGHT. WE MAY CLARIFY THAT THE ONUS WILL BE SOLELY ON ASSESSEE TO PRODUCE THEM BEFORE AO, IF SO REQUIRED BY HIM, ON T HE DATE FIXED BY HIM. THE DEPARTMENT SHALL SUBMIT THE SUPPLEMENTARY REPOR T AS EXPEDITIOUSLY AS 91 ITA 3522/DEL/2013 POSSIBLE. THE REGISTRY IS DIRECTED TO FIX THE APPEA L IN REGULAR COURSE AFTER THE REPORT IS RECEIVED FROM AO. ORDER PRONOUNCED IN OPEN COURT ON 22/05/2015. SD/- SD/- (A.T. VARKEY ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22/05/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. DR, ITAT, NEW DELHI.